Cara 100 News:

GE lowers profit guidance, suspends stock buybacks:

http://tinyurl.com/4jsd9w

----------------------------------------------------

Fortunately, we in the U.S. live under free market capitalism and can't short it. ;^)

Bill, thanks for calm discourse, and advice. All the best.

I was wanting to buy GE around $22 a few days ago but was waiting for the price to come to me. Maybe I will get a chance to sell some puts below that stock price today. With volatility high, I might get a good price.

Also looking at WGW, SLW, BA, CAT, DE, INTC, NVDA, TTM, DELL

All cash right now...

Futures really turned after CNBC interview with representative from PA saying an agreement is close to being reached in principle in both House and Senate.

Automakers get $25B in loans

House approves $630B spending bill

The Pentagon will receive a record $488B budget; automakers get $25B in loans; offshore drilling ban lifted.

http://money.cnn.com/2008/09/24/news/economy/house_bill.ap/index.htm

Paulson does not want to scare congress. So he has offered them his own version of a teaser mortgage rate of just $1 trillion. The true figure will only kick in later, like one of the adjustable rate mortgages that tempted millions of optimistic home buyers. Once congress is locked in to a "blank check", the funds will keep rolling until the presses run dry!

An old maxim is that, gold makes sense when nothing else makes sense. Today, not much does make sense. Gold is likely to explode, at least in the initial stages of panic. In a recession, cash becomes a king. In a depression, gold is an emperor.

http://tinyurl.com/3hn8g6

re:bottoms

something I read a long time ago stuck with me. It said that bottoms are formed with price or time or a combination. They scare u out or wear u out. Timewise, I'd say 30 days from last week's low. Pricewise, I'd say a retest of last week's lows that fails but the MACD diverges.

JMO. There'll be ample opportunity to go long. Keep in mind the end of month effect is coming up (starts last 1-2 trading days of month thru 6th trading day of new month).

I respectfully disagree with you, Mr. Cara, that America is "too big to fail." The fact that the US economy produces far, far less of what the world wants than what it receives from the world shows that America has already failed.

Though the adjustment will not be instant, and the USA will not disappear altogether, it will be net beneficial for foreigners to stop wasting valuable resources sending valuable things to America in return for paper which is proving worthless.

This is not just a financial crisis, it is a moral crisis and a crisis of global trust. The will not US allow foreigners to swap their massive reserves for equities, and is instead going to devalue its currency to render debts counted in it meaningless. This is blatant theft on the scale of nations.

[Bill Cara note:

Except for the first paragraph, I'd say we are pretty close in our views. In the first para, I also agree that the US needs to manufacture more of the goods that it produces in order to give its people in small cities and towns good jobs. Financial trading is done in the money centers of NY, Boston, Chicago, and San Francisco. If Americans want to go down that road and flock in massive numbers to those cities, so be it, but i don't think so. So, yes, I agree with that point.

But American consumers have been buying foreign goods, and so American business owners have been shifting capital to those countries. This has turned America into a major creditor nation. That cannot be done as long as the Administration with the approval of congress continues to send its military abroad, at huge additional cost to the taxpayer.]

The TED spread is now at 3.26. The crisis continues.

Anyone hear Alex Jones on Coast to Coast last night talking about the bailout?

This maneuver by Paulson and Company is, even when viewed in the best light, is a brazen, balls-out attempt to solve most of Wall Streets problems by shunting them off on the taxpayer. According to Jones, this plan if it should come to pass will represent the biggest transfer of power to the corporations in the history of the world. This plan, according to Jones will represent the death knell of the American citizen, as we will all play an even more subsidiary role to the great and massive corporations. And that's putting it mildly.

IF the founding fathers were still around, they would oppose the corporate bailout. Hell, the founding fathers HATED corporations.

Calls to legislators are running 300-1 AGAINST the bailout/giveaway. Do you thing we're going to see some true democracy break out over this one?

One more thing...Could Bill Gross please grow a set so that when he talks he doesn't sound like a teenager with a paper route? Also, doesn't Laszlo Byrinyi sound a hell of a lot like Kermit the frog?

I agree with the VERY accurate and profitable trader BSI87...Even if this thing does represent a "bottom", there's utterly no reason to go long right here.
If a bull market begins, don't worry, you guys will be some of the first to know. You don't want to be the first passenger on the Hindenburg, nor the last on the Titanic. (sorry for the disaster metaphores, but they come to mind.) When it begins to LOOK like this bailout plan MAY not make it thru congress, this market's gonna TANK like the damn Lusitania.

Where are the alternatives to the Paulson plan? Why dont we give them loans instead of taking on their garbage?

The argument that congress will fall in line in support may not hold true this time because most Americans oppose both candidates and oppose congress as it's now constituted. We ALL know that this bailout will fail to help the underlying issues in the "real" economy, thereby leaving congress hanging out on a branch. How many Tasers will it take, how many holding pens will be required to hold back the discontent that Americans will feel once they realize theyve been screwdoodled by Paulson and Company one last time? It could get real ugly. Yes I'm feeling prolific today but will try to refrain from further postings.

[Bill Cara note:

I agree with you, but this is not a trader's discussion. Around 2005 and 2006, I started asking how high would the walls of the gated communities have to be before people would see the error of going down the path they were. The warnings were there. Anyway, shark, please don't stop. When you cut the use of expletives, your contributions here are valuable.]

You don't want to be the first passenger on the Hindenburg, nor the last on the Titanic. (sorry for the disaster metaphores, but they come to mind.

LOL..... thanks for my morning laugh shark_attack

[Bill Cara note:
There may or may not be an agreement this Sunday, but I think it's crucial to have one. If it still looks that way on Friday afternoon, I think a straddle on your biggest positions might be in order -- rather than just selling.]
Bill
Thank you for your comment, advice and opinion
I like to let you know that since I join your bog I am up over 70%. I never made this kind of money in 25 years. You mention “straddle” but I am not there yet, will take some time to learn that. Right now I am having tough time to manage over 250k in stock market.
I have invested 40% in Cara 100 Company that is in buy list and 30% in QLD/SSO/USD
UYG etc.
I thank you again. Without your advice in WIR and Daily Report I would have not made this

Rob G,
They have been giving them loans with the TAFs and liquidity injections at crisis times. At the moment those aren't working. Banks are hoarding cash because they are concerned about their own solvency and everybody else's. They need to get the bad debt (and leverage I might add) off their books in order for money to flow again.

TED spread spiking with a high so far of 3.41. I don't know if it has ever been this high.

Shark,

My guess is the markets chop around thru the next options expiration AND the expiration of the shorting band. Options expiration indicates DJIA 11,200 for Oct and 11,400 for Nov. So frustration for bears and bulls alike.

What would change my mind is a retest of last week's low that fails, takes out all the sell stops, and reverses with a MACD divergence. Keep in mind the 50 DEMA sits at 11,382, about where it failed on Monday (and close to a bearish engulfing). So it's likely that area will be sold again.

Vinod,

Want to manage some money for me once I sell my GE stock?

the alternative to Paulson's plan IS to allow the Titanic to hit...a ship that big needs a bailout this size...

sometimes you let your kids learn the consequences of their actions, and once in awhile you pay the bondsman..

Vinod

You should start your own investment firm. Where do I send my check?

Hello Bill,

I am a faithful reader and this is my first comment.

I just don't see a new Bull Market around the bend; and heres the reason.

With approx 70% of GDP being consumer spending how will any free $$$ be available from the population to drive a Bull Market?

Where will the company profits come from?

Consumers are tapped out and up to their eyeballs in debt. And if they are like me (Baby Boomer). Serious effort will be going into paying down that debt for the next couple of years...

Could you please comment on this?

Thanx

nonrev

[Bill Cara note:

I have opined that the Bull starting now would be range-bound for these reasons. I have recommended avoiding most consumer discretionary stocks and financials for the reason you give. But it's a big world, and there is need for housing, transportation, food, utilities, technology, and so forth. There is a credit problem, but there is also probably the biggest cash position ever on the sidelines. Many corporations are well funded and immunune from credit market issues. Those with jobs will work harder to keep them. Life will go on. Speculation will drop, but stable returns from (higher yielding) conservative and strongly backed bonds and from dividends paid by financially strong corporations will attractive some of that capital on the sidelines. People will be looking for value, and there are many values on the market today.]

Bill,

"Americans have never been pushed like this to help their country, and they will."

We will only because we will be forced to do so. The last number I heard yesterday was that congress was getting a 97% opinion against this bailout.

Those in congress are putting on a show of reluctance in order to keep their cushy jobs. They, like Bush, are saying we need to rework the system to prevent this ever happening again. It is pure BS!

Most of these guys were there when the Glass Stiegall Act was repealed, when commercial and investment banks, insurance companies, savings and loans were all allowed free reign.

They were charged with oversight along with the Fed, SEC, Treasury, rating agencies, insurers — all were gaining in some way by ignoring this fraud.

Avoidance of taking the only real medicine for this affliction has been and still is the battle cry.

These greedy, self-centered actions brought this on and aiding the perpetrators based on the too big to fail excuse will lead to repetition.

The proposed "solution" will simply delay judgment day and extend suffering at the lowest levels of society.
Americans should push back and take back our country. Fight this crap and those who are protecting the vile bastards who brought it on.

We need to rebuild our manufacturing base to be competitive globally and stop rewarding those whose loyalty is to self alone.

In my city unemployment is now at 10% (unofficially, I'm sure it is higher and job quality is pitiful) and the doom criers are still saying, "We could get a recession if we don't fund this."

All of the candidates are clueless about what it is like for ordinary citizens today and are willing to let the same "experts" who brought us to this sorry state take charge of the cure.

Our Congressman, Don Manzullo, is bellowing "FOUL!" But he has been a backer of all those policies which precipitated the crisis.

Let them sell off their assets and cover their own liabilities.

Let the market readjust housing prices and set interest rates.

The banks won't foreclose — that problem is too big for them to do so. Individuals can renegotiate knowing that.

If we really believe in FREE markets, now is the time to demand them.

[Bill Cara note:

Markets aside, I think sufficient numbers of voters have contacted their representatives to say they are mad and won't take any more of this pandering to credit mongers to bring about a change of thinking in Washington. I think there will be a swing toward policies that support wealth creation. Today Obama gave a news conference where he talked about investing in alternative energy and education, and so forth. He gets it. I'd like to hear the same from McCain. I'd like to hear it in the Friday debate. If he doesn't show, then he would have broken a contract. That's not an acceptable practice for a presidential candidate. I hope he comes to his senses.]

vinod- a true salesman knows how to close...post the POB you want the checks sent to, and let the lawyer clean up details over the weekend..

nonrev- going back to the kid in jail analogy-> the new bull starts when you bail him out, he gets a job/goes back to school, and becomes productive/starts a family...the citizens of the US just want a chance to put the excesses of the last two decades behind them, focus on their companies/work, and get on with their plans...

lol. as long as vinod's address isn't in sweden.

..and their lives...that's the mentality behind a bull market..

Toxic Garbage - If Congress wants to help these bag holders and the bag holders want help, then some sort of deal can be worked out to the advantage of both. If the bag holders don't want to deal, then let them fail.

How is it a lack of planning and prudent behavior on behalf of HB&B so conveniently constitutes an emergency on behalf of the US Taxpayer? Congress should be looking for alternatives to bailing out HB&B which will keep the economy flowing even if some degree of pain is forecast.

This is our opportunity to demonstrate free market enterprise.

Vinod,

If you've made 40 percent in the time since you've been coming to this blog, you should be thinking about quitting your job right now. Hell I should be sending you MY money to trade.
You have no idea how many pro investors haven't even SNIFFED those kinds of returns in the past year, but if I told you their names you'd definitely recognize them.

2nd
I must also give you credit for my success in market
I have learn a lo from you

vinod- thank you, and i'll give you a POB to send the red envelope to (LOL)...

seriously, you've done fine going with your own intuition...

Yesterday's final hour started to look like we were careening into the abyss yet again. Then we closed back above 10,800. This, after a three day, low volume pullback? Smells like short covering??

I bought a little DDM aftermkt late last night @ 54.5, it peaked before the 8:30 econ news (durable orders get creamed, initial claims up again) and the futures have since retreated somewhat. If I wasn't out of day trades, I'd pick up some more.

And this is before they pass some semblance of a bailout. Images of pitchforks & torches are misplaced, something amenable to Wall St. will be passed. Incumbents have already spilt the milk, why not spill a little more? Election shmelection. The right track / wrong track polling #s haven't been this bad since Nixon. We all know who's going to win in Nov, its going to be a referendum on the last 8 years. As for people rising up against Congress, the masses are told that there will be a catastrophe if we don't do X, then we will do X. I will be very surprised, (but very happy) if we don't.

Grym,

Beautiful catch phrase: "Take back our country!" or "Take back America!"

OK, I feel better now, even though I'm sure what I think matters not at all.

Back to reality:
It seems to me that over the long haul the dollar can only fall and rates rise due to need to borrow. (Any other view and reasons will be appreciated.)

I made out well a year ago with Rydex 2X Inverse Dollar Fund — RYWJX (paid 18% cash dividend) and am considering going back into it in a big way.

Any thoughts, anyone?

TED spread at 3.37, another all-time high.

http://tinyurl.com/2uwt2g

article from seeking alpha

speaking of “cash”. Guess what? The U.S. government doesn’t have any. So how is it going to pay for the $700 billion bailout? The same way it always does, by printing money. The only thing I can see with absolute certainty is that the “bailout” is going to cause a significant further devaluation of the U.S. dollar. That creates an opportunity, and there are a few ways of playing it.

One is to buy PowerShares DB U.S. Dollar Index Bearish (AMEX:UDN).

UDN is designed to rise as the U.S. dollar falls relative to its performance against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc. As you can see from the above chart, UDN has outperformed the DJIA by 8% over the last 10 days as this banking crisis has heated up.

http://tinyurl.com/4blsw9

trailing 2 buy stops on DXD and 1 on FXP.

I remember some 25 year ago I was in first place in football pool at my company and we had 25 people in it
Near end of season, at lunch time I asked what is different between kicking and punting.
Every one laughs and said you do not know the different and you are in first place?

2nd,

Of course it's a new day and Fannie/Freddie apopear to want to go up again. Freddie may actually penetrate the 20 day MA and rise substantially, not saying it'll happen but it's a possibility.

You see anything interesting today? You bsi87?
Bsi87 is damn good at this, he knows a LOT more about trading stocks than I do, which isn't saying much but in his case it is.

Bill,

Thank you for your missive today. It shows the leadership and strength we need in this country at this time, not the pissing contest we've seen in the last couple of days. Perhaps, America has hope. You made my day. Thank you.

gold seems to have drifting patten moving down towards $880, its bounced back up from that area a few times this week, but has failed to make any sustainable gains in the $900 area, usually just brief spikes up before sinking quickly.

volume is fairly thin on the shares as they base around.

im thinking 1 of 2 things may happen:

a drift down towards $870 before a hard drop towards the $830-850 region or more basing action until a sudden upward spike that signals the next upleg in gold taking us past the $1000+ highs made in march.

good luck.

(long gold)

Kiron,

Good point! Very true! If you read Andy Kessler oped this morning, we should all feel good about the "Paulson trade". If Kessler is correct, then why arent other investors lining up to buy this garbage??? In my mind, anything the government gets their hands on usually turns bad. I do hear that the Chrylser trade and RTC made $$ for the US Treasury. I just hope they do not overpay for the garbage they are buying and hoping to sell.

I live in Seattle. It's a pretty politically active place, but I've never seen anything like this. I see people with signs basically saying that if the incumbent Senators vote for the bailout, that they'll be voted out. I'm not talking about a couple crazies. I just drove to work and saw a crowd of ~50 in downtown Seattle protesting. It's 6 in the morning and they've already started... This could get ugly....

Bill wrote:

"Then Paulson joined the testimony and things went straight downhill from there.

I don't know what the problem is but this line from Paulson might give us a clue: "Many of you are angry about executive compensation and rightly so. We must address this problem..."

I don't don't how many Congressmen and women are on the Committee Paulson was speaking to, or exactly how much they earn in a year, but I know that every year he was at Goldman Sachs, which terminated in June 2006, he paid himself ten times more than all those elected representatives make in a year, in the aggregate."

Well, here is his compensation:

Henry Paulson
2006 Cash salary: $129,087,000
Stock, other pay $34,900,000
Total pay $163,987,000

2005
$600,000
$3,363,422
$3,963,422

2004 $600,000
$11,660,000
$12,260,000

Source ABC news

[Bill Cara note:

I flat out don't believe the 2004 and 2005 data. If that's what his tax returns state, the IRS ought to be called in right now, along with the FBI. Tell me, how could a couple thousand Goldman Sachs employees be making more in a year than the Chairman and CEO. Goldman is a money machine, and it is the practice of the CEO to take his skim. If the man says he received less than $60 million a year in compensation for 2004 and 2005, which were great years in the market, and for Goldman Sachs, then I refuse to believe it. Call in the cops.]

Mr Cara,

I have been giving out your website to all my buddies that trade stocks and these guys are happy and more educated for reading your site. I trade options on futures and read about your thoughts on overall economy. I do disagree about the bottom call though - and feel pretty sick about it. I have watched your predictions come true and you are absolutely right, I can't make your bottom call ring true in my mind.

Please clarify - are you saying a new bull market within a secular bear? Or a true new bull market that takes prices back to new highs.

How the bull market can stand for any longer than a couple months without something to bring us out. The structured finance brought us out of the last recession and has now been disproven on fake profits. We no longer make widgets and have labor-cost arbitraged jobs to foreign countries. Our technology is premier, but copied. I have asked every financial analyst where the profits and earnings will come from when consumers have finally been "tapped out." No one knows it seems. The nation has to save rather than borrow and this comes with a price tag of lower future profits.

Please Mr. Cara - let me know where I am wrong and convince me. Fortunately - I sell options via credit spreads on both sides of indexes and don't really care about overall prices (just that they don't go into my strikes). But, I do give a slight edge to selling more calls than puts due to the belief in a failed bailout and continued market decline.

Full disclosure - up 251% in a year (love the volatility).

[Bill Cara note:

As a segue to the following comments, let me only say that for a year China has been operating in exactly the way you think you would like to see for America, but their equity market was collapsing all along, despite holding the Summer Games for the world, and despite GDP growth that exceeded a mind-boggling +10% per year.

I believe the market is transitioning from a secular Bear to a secular Bull, and that it is in the first upleg of the initial Bull cycle. There will be over the next several months a series of higher highs and higher lows. From the lows in DJIA since mid-day Thursday, which is just the equivalent of four full sessions, the DJIA is up about +7% and traders are ignoring that, choosing instead to be caught of in rhetoric coming from politicians (who are involved in a public negotiation) and media (who are doing their usual thing of pushing emotional hot buttons). I believe that in a few days, the TED spread will drop, the VIX will drop and increasing numbers of traders will be seeking value in the equity market.]

re:indicators

$NAA50R (calculated at EOD) shows 28.19 and declining. Usually trades below 20 for a tradeable bottom.

$indu:$vix. Made a yearly low last week but the MACD was lower than in the July low. No divergence.

$cdnx. MACD made a lower low this last time compared to August.

Bill,

I certainly agree with your opinion that Bill Seidman would be ideal to handle this. He is one real, no nonsense guy whose comments are always clear and cut to the heart of any issue.

A few months ago he was on CNBC (One of the few times I turned on the sound.) and he laughed out loud when another guest defended the 15% bracket on hedge fund managers' incomes — comparing it to hiring someone to manage a grocery or a used car dealership.

Shark,

This kind of open is NOT what a bull wants to see. The Prez got Ma and Pa juiced up and GS will take their money.

See where the markets are at the end of the first half hour and how they close 'em. That'll be the tell.

Bought freddie 2.02 and sold it at a real nice profit. I know I should have kept it but they showed me the money!

I don't quite understand the rally in Fannie and Freddie but in at 1.60 so keep on rockin'

look at GS, the poster boy. Gapped up at the open, trading below the open AND previous close.

CNBC guests saying this is a crisis of confidence. This makes me think a solution will require a whole new team of confidence men ...

[Bill Cara note:

Funny, but remember there's an element of truth. I have opined recently that Paulson, Bernanke and Cox need to be replaced, and Seidman brought back. Washington needs to bring about an attitude adjustment. The new players -- or some of them anyway -- will become 'con' men because it's true that absolute power corrupts absolutely. That's because conflict of interest is permitted, which I say must be eliminated.]

am getting back in higher soon

I'll just throw out a notion that keeps popping into mind as I read various opinions regarding the current financial woes:

Would it be possible to engineer a bailout package AND to begin pushing toward a more equitable tax system at the same time?

For instance, for those commercial entities that currently need help to get through this crisis, similarly as with AIG, the US government gets an equity stake appropriate to current market prices for the dollars given to rescue. As the crisis is worked through and market conditions push prices up each entity buys their equity shares, along with whatever previously toxic credit vehicles as may have gained viability, back from the government, up to some maximum position size, say 10%. Thenceforward, the IRS (or designated agent) manages the equity positions as part of a relatively permanent revenue stream for the US government.

If we are going to keep falling into socialist rescue scenarios, is there not some way to constructively implement the implied "stakeholder" interest of the taxpayer?

2nd - These aren't my kids, in fact they aren't even kids. These are the organizations which have been playing dirty pool for far too long, returning sub-standard performance to their customers while selling financial advice counter to the best interests of their customers.

Where in the bailout package is there provision for a level and prudent playing field which speaks to transparency and full disclosure?

I'm thinking that even if a package to rescue these unscrupulous businesses which have led us down the path is struck, then we are likely to discover an even larger volume of infinite gravity than previously imaginable (upwards of 60 trillion).

I must be beginning to learn to dance as I bought some Dell yesterday. Thank you Mr. Cara.

Re. getting the check of $700B now. The best thing about getting money from someone, is that you can always get more later when you need more.

Why doesn't congress look at the alternatives, those that do not involve saving HB&B and these greedy people? Why not ask for these men to give back their bonuses?

I really do not get Paulson's comment that limiting exec pay may cause banks not to take the bailout. What is he thinking? Then this plan is not needed!

If the administration really wanted to goose the market, how about a temporary repeal of the capital gains tax? There are a million similar things that could be done as opposed to just pissing away another $700B.

The credit markets seem to be imploding, yet equities are booming this morning. This disconnect will correct itself. Our country is based on credit (debt), I have to imagine that equities have not seen their lows.

Moreover, the economic news today was all bad; initial claims up big, durable goods down big and we are starting to hear about gas shortages in the SE.

Getting in higher...a bad idea: getting in the first time a REAL good idea. net result? sharkey looses commission money. How you can buy a stock at 2.02 and have it go to 2.30 in about 17 minutes and not make money is amazing, but let this be a lesson...it's the conception AND the execution.

In one sense, we're just monkeys who push 2 buttons, that's all we do...push 2 buttons a sell button and a buy button. Any description fancier than that overstates the thing. The question is, can you discipline yourself enough to push those 2 buttons at the right times? Actually it's the conception of the trade part part that is the easier thing.

re post yesterday: ToddinFL at September 25, 2008 5:23 AM

Bill,
While I don't disagree with you that few people are prepared for a serious contraction and what it entails.

I think people in general are saying let the contraction happen, purge the system and lets talk about a bailout of the taxpayer if necessary. As opposed to rushing to the aid of wall street, who has already been amply rewarded, at the expense of the taxpayer.

I don't think anybody disagrees that there needs to be a purge. Its really a matter of taking your medicine now or later. How much more medicine will we need later?

[Bill Cara note:

Nobody wants socialism. Nobody wants to put $700 billion (much more actually) in the hands of Washington to solve this crisis. Nobody wants to help Wall Street. But sometimes a rescue package is needed. Sometimes Mom & Pop have to go to their Mom & Pop after the cookie jar runs empty. Let's get over this stuff. Stuff happens. We all agree that fundamental change in the structure of capital markets and financial systems are needed. It was June 2, 2006, just before Henry Paulson took over the office of Treasury Secretary, that in the Dueling Perspectives column of the Wall St Journal that I argued for this. People laughed; but the truth will prevail. Nobody is laughing now. My opponent in that debate ran a couple Funds of Funds and had been senior editor of Fortune magazine I think. I wonder today how his Funds are doing, or if they are even still open. Maybe the WSJ can check for me. Look, all I try to do in this blog is to separate what should be done with what is being done. I do it objectively based on my experience in business and accounting and in the capital markets at a very high level. I don't have all the answers, and I am frequently wrong, like all traders. But I am doing all I can to talk common sense to people because I know they are getting sold continuously by special interests. If the people are going to learn, they have to take a deep breath and watch prices. They can continue to pressure their elected representatives to do the right thing. In time, things will improve. In history, society has always evolved to a better place. What is happening though is that special interests are constantly becoming more organized and powerful. The people need to be able to think and act for themselves in order to fight back. I am just one of those people. Hopefully, if enough of us do the right thing, we won't have to take too much medicine in the future. Alas, I think you are right in that we ought to expect a lot.]

Marc Farber said US$ is quite attractive in a near term in this morning interview. He said long term US busts.

I recommend people to watch this interview on the bloomberg website.

VIX has fallen through uptrend line, and the DJIA held 10,900

I really wanted to stay long, which usually means I should exit. And the volume wasn't impressive. Out of DDM @ 55.8

Shark,
You are the expert on the FRE and FNM trades. Can you give us a quick primer on why one trades a little higher than the other?

Silver is noticeably strong @ $13.70, +$0.50

This is always a good clue that speculation is returning to the marketplace....

Hmm.... Over 130 protests planned for today to protest the bailout. There is one at the Washington Mutual Building at 4pm in Seattle. There are already 50+ people there...

http://seattle.indymedia.org/en/2008/09/269023.shtml

From my understanding this bailout bill is designed to "unclog" the banking system so they can get back to lending, or extending more credit. Do we need more credit? I know the US needs to create about $3.5 trillion a year in new credit just to keep things stable (Flow of Funds report from the Fed), but there comes a time when more of the same is not the answer.

I believe the Austrians will be vindicated.

"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

- Ludwig von Mises

Do we stop the credit creation now? I doubt it. The $USD will be toast and that is a dangerous thing.

Bush's speech (video) in case you missed it:

http://tinyurl.com/3g8eyv

vinod- the bull seems to be catching on, and that's no bull---...

words come the dems are folding...back in freddie

[Bill Cara note:

There will be acquiesence on both sides in order to get a deal done.]

Gold just dumped from 888 to 870 in a few minutes.

[Bill Cara note:

Hot money is swinging from commodities to financials and the USD, for now.]

2nd - I calculate you're up about 218% on your FRE.

out of fre for now

Do we have short candidates in the financials after this run up?

2nd
My 20 OEX call are rocking, this time going to hold untill Monday.
going to follow Bill's comment and going hold hold all position untill Monday
I know it is my decision amd I am responsible for my action

and after Oct 2nd....ooops

Gold getting sold off on the broad market rally - I am waiting on a bench at gold $850 with buy list full of mid-range PMs in hand.........JAG.TO, MAG.TO (selling off nicely), WGW, SMF.TO, RBI.TO

Sold a little bit of VNP.TO on the pop to $5.60 to raise cash as I am not sure that the gold sell off will last for too long.

shark_attack
I mised FRE/FNM train
next time I going to take a ride

I don't like helping the fatcats on Wall Street, but if my fatcat neighbor"s house is on fire, I'm willing to help put the fire out in order to save my own house from burning down with it. I just don't understand these cut your nose off to spite your face arguments (argumentum ad odium).

at least I'm back in the green, but not as much green as there oughtta be!

I don't believe in buy-and-hold in an overnight sense usually, but for daytraders it's often a good idea.

(assuming so far that this is a rumour-triggered short squeeze that should peter out after a couple of hours)

More interesting perhaps is to look at which sectors are not up particulary:

XLB, XLE not so surprisingly, but - IYR? nobody short it anymore? hmmmm . . . .

XLP is also interesting, getting it's first short squeeze after the breakdown?
or are the bulls coming back to it?
will have to watch it closely to see if it gets bought or not.

vinod...can you explain OEX calls? Is that on an index? Great story about football by the way.

CP- if only it were the entire portfolio (LOL)..

To respond to Bill's comments earlier this morning.

Bill Cara said:

"In theory, Faber is right. In practice, how many people here are ready for a Depression? Can you do without a job? Are you ready for paying a mortgage that becomes so much greater than the value of your house you want to foreclose like so many other of your neighbours? In theory, this is the wealth effect in reverse, and the public shouldn't wish for this. The public needs the fractional reserve system of the Fed to be stabilized, and Bernanke is saying that the Administration needs to reflate in order to avoid a devastating deflation. In theory, I disagree strongly with Faber on this point. I'm trying to be practical."

OK, let me respond. I'm self-employed and in the construction business in SW Florida. I am for all intents and purposes already out of a job. It has been VERY slow here for a long time. What little work I've been able to scrounge up, those people for whom I've already completed their jobs, they owe me over $8,000. So I know fully well what it's like making a mortgage payment on essentially one income (thank God for my wife's job).

We bought a house back in 2003 at what we thought was a reasonable price given the times, although it was a fixer upper so I've put A LOT of time and money into it (at least $15,000 in sweat equity and $10,000 in material costs). If we had to sell today, we would lose money, that is to say, we're upside down on our mortgage.

We need discourse from reasonable, sound thinking citizens about how we allocate resources in this country. The misallocation of our resources and assets by our leaders on an ongoing basis is so incredibly out of hand that it makes red hot mad.

All the money spent in Iraq - what if that money would have been invested in the U.S and not for the interests of a few ?

All the money spent on these bailouts for Bear Stearns, Freddie and Fannie, AIG, and now this latest debacle.

What if we as a nation examined how we could allocate those funds to benefit the people, not the elite ?

I'm a registered Republican who voted twice for George W because I didn't like the alternatives. I can't vote for McCain because he has surrounded himself with advisors who are part of the problem.

I can't vote for Obama if he holds true on supporting Paulson as his Sec. of the Treasury.

Jack Welch was on CNBC this morning, and when they had Gross on from PIMCO, Welch questioned him as to what the next step is once this $700 billion plan is implemented. These fools are already planning for the NEXT big bailout. They know it and are laying the groundwork for more bailouts before this one is even signed and passed by Congress.

This situation has gotten completely out of hand, IMO.

vinod- Monday? What happened to Friday? WTH, it's only Thursday...(just kidding, my man)...you're probably right-> fund managers will be looking for end-of-quarter action Monday..

SLW is a buy here around 9.80 if you are a true believer, down in the middle of the intraday gap.

The daily gap has been closed however, less bullish than if it had been left open.

I think once the bailout is passed, the market will focus on economy and earning.
And earning confession like today's GE

So is GE a buy at $24 if you own it at $31?

Seems to have recovered the 5% plummet this morning.

watermelon - Or, you could buy and hold $10k of GS stock this morning. Make that $20k, because I don't intend on investing in that which has created these problems.

just sold my FNM at 2.23 that i bought at 1.79.

any good buys out there? i'm looking at MELI...it's at my price that i was hoping for back in july...

pappdjavul

Aprreciate your SLW updates. Keep'em coming!

I understand Bill's concern. But the situation is like average Americans get hijiked by elites.

If bailout is not approved, everyone get hurt.
If bailout is approved, will Henry Paulson be impeached as Bill suggest? I guess probably not.

So here is the question for Mr. Cara "if Henry will not get the impeached, will you still support the bailout?" If your answer is yes, Henry is actually irrelevant.

Then business as usual. We will see another bailout down the road.

Bill,

You had mentioned that the big players are rotating out of commodities to buy the financials. Do you expect that they will sell on the news of a bailout and then rotate back into commodities?

woohoo, caught another big piece of the latest freddie move

ToddinFL

I don't think the Dem nominee was going to keep Paulson as Treasurer. I think he said something like he'd keep him around for awhile, not necessarily as Treasurer.

If you ever have taken over an operational mess, believe it or not, it helps big time to have the person around who was there. You can see some deadly landmines that you might not perceive if you were there all on your own. Have been in both situations in the past and IMO, it helps to have access to the predecessor. Doesn't mean you endorse him or agree with him, just that it helps.

Kind of reminds me of the old slogan "keep your friends close, but keep your enemies closer."

If anything, it tells me the Dem nominee is thinking this out. Just my 2 cents.

We live in strange times.

In the Weimar debacle, the common man pushed a wheelbarrow of money to a store to buy bread. In this Paulson debacle, the common man pushes a wheelbarrow of money to each of Paulson’s friends for nothing.

This same common man continues to put his faith in the laws (eg: bailout) that are passed by Congress even though the President has a strong record of signing such Bills while brazenly stating that He will enforce/not enforce whatever parts he wants. In the case of this bailout, we know in advance what he wants, yet remain ever hopeful.

This bailout is needed to help Banks free up lending, right? So, tell me again why did the Auto Mfg’s also get a free gift of billions?

We are told that “No shorting” of financials will keep nasty speculators from driving prices down. So, tell me again how IBM qualifies?

Sad; so sad. I think the catch phrase between now and elections should be :

“BAILOUT --
GET OUT!!

Fax that message to your representatives.

"...but if my fatcat neighbor"s house is on fire, I'm willing to help put the fire out in order to save my own house from burning down with it."

Going along with your analogy, I think the fatcat is guilty of arson. He should be held responsible for damages and should probably spend some time in jail.

From The Washington Times:
..Treasury dramatically expanded its bailout plan to include buying student loans, car loans, credit card debt and any other "troubled" assets held by banks..

http://tinyurl.com/4ozkv8

watermelon, aren't there perhaps better alternatives that do not save these fat rich cats? There have been several alternatives floating around. Shouldn't those be examined by Congress?

BTW, if this HB&B bailout is passed, the markets may pop, but we'd be in a make believe land.

Bill, Watermelon,

Re: practical approach

If we were a "practical" people at heart, we would be spelling it as globaliSation and keeping a stiff upper lip.

Many of us are already living in a depression — no jobs, no benefits, no security.

We are rapidly becoming a two class society. This plan is a good example. The elite get a deal, the rest get screwed. Individuals need to force a deal on their own mortgages and forge a united deal on the "too big to fail" who are too big for their britches!

If we were all in the same boat we could start to bail together. That's my view of practicality.

Vinod,

You didn't miss the train. Wait till after lunch, FRE will have corrected some, and get on for the afternoon session. A stock like that should see more follow through. I am very in the green, you would be proud of me, but I still don't hold a candle to your returns. Fannie may also trade in sympathy as it has the past few days. And lest you guys forget, this morning I said:

"...Fannie/Freddie appear to want to go up again. Freddie may actually penetrate the 20 day MA and rise substantially, not saying it'll happen but it's a possibility...."

Posted by: shark_attack at September 25, 2008 9:21 AM

Freddie went up about 50 percent in an hour and a half. Who on Wall Street is gonna earn those kinds of returns for you?

Oh and Bill is looking more and more right, potentially, regarding this bull market thing. This legislation gets passed and there's your bull market.

FNM / FRE: smells like a bubble, looks like a bubble, tastes like a bubble...is it a bubble?

Re GE:

This from the prubear chat today:

"GE is a hedge fund masquerading as a .. .lightbulb manufacturer."

There is a significant amount of truth to that. I inherited some GE from my father some years ago. Superficially it looks like an old boring but solid industrial conglomerate. I sold it several years ago and am not regretting that.

i have a trading question. if you see a huge volume in the early morning, the price drops sharply and bounce back. The volume is 3X of average daily volume. What does it tell you?

ToddinFl,

Ditto here, Was self-employed for forty years.

Had to dip into retirement funds the last three years before eligible for Soc. Sec.

Got screwed by health insurance co. after one and only claim. ($10,000 deductible)

Two sons in 40s already much effected by rush to globalization.

Same voting background, same view of current candidates.

Jack Welsh and makes me want to puke. (Remember his $26,000 waste basket, etc.?)

Gross is aptly named!

I feel like dong a Peter Lynch yell from the window (Network movie)— "I'm mad as hell and I'm not going to take it anymore!"

I've notified my "representatives" where they can go if they vote for this sellout,

Good luck.

shark: answer to your last question: LEHMQ?

Let's not, and say we did:

Let's call the fire dept to spray our house down while the arsonist neighbors house burns. Let's take their matches away and not send them $200B for additional incendiaries.

Then we could say we helped them by helping ourselves. How can you help others if you are not able even to care for yourself?

Any thoughts on Pfizer(PFE)-buy alert 4 days ago at $17.99 w/ a yield of 7%??

shark_attack
congrat'' for your FNM/FRE trade
I am proud of you that you help many here make money in FRE/FNM

Tonight I'm heading out to buy a new laptop courtesy Bill and this forum.

vinod- if you're looking an entry into Goldcorp, it may come to you in the next few days...

Wavesmash - thnx for yesterday's thoughts on juniors. Still unclear ...

Grym

"Jack Welsh ... his $26,000 waste basket"

Was it gold?

TTM - testing the low here - for the divergence type traders TTM presents a divergence with this re-test - good r/r value

disclosure; initiated position long

Colin Twiggs followers

Mr Twiggs' latest take on the bailout and market

http://tinyurl.com/54qccl

Schleppy,

As a former PFE shareholder, let me just say this:

If the dividend is your main priority, you'll probably be ok with PFE. If you expect gain in the stock price, you'll likely be disappointed.

IMHO, this is one of the most poorly managed, large international corporations on the Big Board.

All IMHO.

Respectfully, clearly, Bill, your views are at odds with the Marc Faber's, Jim Roger's and Bill Hoye's who say that this financial crisis is not fixable -- and that the fixes themselves are the same hubris that got us here to begin with.

It will be interesting to see how things look, say, six weeks and six months from now. No doubt though, 10 years from now the world's economy will be rosy.

[Bill Cara note:

Add Nouriel Roubini, Jim Rogers, and Don Coxe to that list, and a lot more. Yesterday I received a letter as follows:

"Bill, I am caught between a rock and a hard place. You and Don Coxe seem to be heading in opposite directions. You are calling the end of the bear and he is making his largest reduction in allocation to equities ever."

My point is where were all these people at DJIA=14000? Why didn't they go to cash then? And aren't some of them swinging their usual axe? And are they all traders?

At the end of the day, we have to manage risk, not on the basis of hearsay, but on what market prices are doing. My experience and trading tools are telling me that the equity market is transitioning from Bear to Bull. I am not going to defend it all the time because I have other work to do. I will ask that you read all these people because that's what students-of-the-market do.]

BILL

QUESTIONS...

Any comments on GE and its future???....

Do you believe GE is telling the truth when it comes to it's GE capital division....

Are we looking for more downside to the company..

thanks sv

[Bill Cara note:

I'm going to look at GE this weekend because the share price is getting very low. With the serious problems at GE Capital, I don't think I'd rush in. I'd wait for a technical break-out on both the Point & Figure and RSI-7 charts.]

I just heard someone say that America would fail if the US banks went bankrupt. I don't know about you all, but I don't have a problem with the idea of a Swiss bank, or some other foreign bank opening branches here in the USA. Actually, I'd be very supportive of the idea if the bank helped to facilitate moving my money into the global playing field.

Thanks for the input Bull Hunter....I have heard that criticism of management in the past.

2nd
when GG was at 25 and Bill said it is a buy,
I mised that I am not going to let it go now on
Brought some dell and may add some later on
also missed WGW at 1.10
because of job can not go through all the post and that is little disadvantage

Schleppy,

One more idea:

If you'd like a paid monthly, 7-8% annual yield, you might want to take a look at GGN.

I plan to pick some up for the Roth when gold and oil finish their current plunge.

Regards

I'm wading into the metals and some basic materials - a little nervous as I still have a scar from my last little venture. Long XAU calls, Grabbed some JAG and GG, Small med term straddle on GLD.

In regards to the bailout:
Banks and the people responsible for this need to take their medicine. 700B is a ridiculous amount of money to be spent in this manner. With proper fiscal policy, we could push GDP up and be at full employment with an investment in infrastructure and manufacturing. This may be naive, but more wealth and prosperity is created from the bottom up than through top down (remember trickle down economics?).

What will 700B liquidity injection do? Bring down the USD (obviously) and delay or worsen the crisis until some date in the future (when everyone but the poor has had time to find ways around getting their money and their persons out of the country without leaving an arm and a leg behind). 700B will keep the immoral and/or stupid in charge of a failing business model and put the US another what, 20 years behind?

It's a good thing Haliburton ( http://tinyurl.com/4drbq3 ) built all of those prison camps in the US because I see this bailout going over on the public like a lead balloon.

"The Dow is headed for a test of support at 10600. Expect another relief rally if the rescue package is approved, but the primary trend remains down, with a target of 10000. If the rescue is not approved, or restricted with so many provisions as to make it unworkable — the next major support level is 7500"
Colin Twiggs

About different takes on what's happening and different forecasts...

First, as it was noted here on multiple occasions, that's what makes the market for any trade to occur there has to be an agreement on price and disagreement on direction.

Second... main character in a classic book on philosophy of capitalism, answering the question on how she managed to remain unmangled in a very hostile environemnt, said: "By placing nothing abive the verdict of my own mind". Bill didn't get to where he is by blindly following anyone; neither did he skip any opportunity to learn from others and from the market itself. Don't take his, or any other authority's, word on a blind faith; don't dismiss it either, try to understand the process of thinking behind the opinion. Whether eventually you agree or not, you'll learn a great deal.

Just some general philosophy during slow market time :)

Re PFE.

I would not buy any big pharmas - I did have 5 of them at one time. Even MRK, which is probably the best of them. I caught MRK around 28 & held nearly the whiole run up, but look at it now.

The problem is, their business model is compromised & commoditized - the easy blockbuster drugs have probably all been found, and their patents are going out one by one.

Biotech, nanogenetics - there
"should" be some interesting companies in this area, but I never found any I would want to buy.

Well, I do have a very little in one tinycap - CBMX.
Have had it for years, it is now almost back up to where I bought it ;-) I like their technology (and I have a background in IT, laboratory & genetics, so I understand very well what they are doing), but they have never been able to make any serious money.

Thanks for your input on Big Pharma, pappdjavul.

I'd be interested in your take on MNTA and JAV.

Regards

re:TTM

Looks like H&S on hourly. one cancels other order.
buy limit 7 or buy stop limit 8.81/8.84

""Bill, I am caught between a rock and a hard place. You and Don Coxe seem to be heading in opposite directions. You are calling the end of the bear and he is making his largest reduction in allocation to equities ever.""

When did this bear market start? Why is this not just the end of a counter trend correction within a bull market? Seems to me that only about 9 months ago the Dow was at all time highs so how is it that a bear market lasts only that long? Just asking.

[Bill Cara note:

Michael, I am flabbergasted at you. When the DJIA plunged from 14022 in July 2007 to 10459 last week, that is a 14-month Bear market. In October 1987, the DJIA dropped -30.0% in less than two days. That too was a Bear market -- in two days. I am sorry, but I don't have time to argue these points. Moreover, I am going to ask you to remove the agora.com link and, if you don't mind, please consider whether your continuing to get me exercised is going to be tolerated by me much longer. What is happening today is so much more serious than you seem to comprehend.]

Let's not forget this adage, I think from P.T. Barnum. "NO body ever went broke underestimating the intelligence of the American people."

re:PFE

Max pain for Oct 17.50. They might not be correct but they're putting down their money betting time AND direction. I like to see either 5 buck upside potential minimum or 20%. That makes it 12.50 or 14. Otherwise there's always another bus.

vinod - I hear ya man, often I've found myself on the sidelines drinking the wrong kool-aid. But now I think I'm learning some of the dance steps and hope to learn them all...

Alan - re your comment about the Marc Fabers, Jim Rogers, et al. These people may be talking their own book - perhaps they want to see more market down pressure to maximize gains on their own positions.

Trust no one with your money...

Dave

re:BA

Triple RSI buy.

one cancels the other order. buy limit 56.16 or buy stop limit order 57.64/57.74

- pappdjavul

Re: SLW. Do you reckon that the posited bullish follow-through from bail out bill + end-of-quarter fillip will drive down PMs and SLW further?

In other words, will early next week look optimum for SLW et al?

killer whale,

Actually the quote is from the great H. L. Mencken, but a great line never-the-less.

Regards

observations.

DJIA was up 180 pts first half hour. It would need to be up at least that amount in the last hour to confirm that the big boys/institutions are buying this "rally". The 10 day ATR is 317 pts. Not saying it couldn't happen but I wouldn't bet the ranch.

I have/am buying certain issues toward the long side but selectively.

I don't know if Bill still has the infamous "CNBC Real Estate Road Show" that was produced back in 2005 I believe but I still can see that smiling face of Bill Griffith as he tooled around in a RV interviewing real estate geniuses telling gullible viewers how easy it was to get rich speculating in real estate. Bill Cara called out CNBC and was proven right. Fast forward to today-I have never seen such doom and gloom in all forms of media-newspapers, magazines, television, talk shows, blogs you name it. You can bet the powers that be are working overtime to scare the hell out of the investing public, and drive down stock prices so they can scoop them up at bargain prices. I don't know when this time will come but I do know the real estate values having been dropping for years, the derivative mess has been building for years, and HBB will use the media to deceive the public. Where was the media when the market was hitting all time highs? Buffet has made a big bet the rate of asset erosion will soon begin to slow. He has enough money to ride out the storm. GE lowers guidance, the stock gaps down over 5%, and now trades nearly 10% higher than the morning low. That may be the market telling you the stock is sold out having declined 47% from its August 2007 peak, and has discounted a lot of bad news. Turn off CNBC monitor the simple RSI system Bill has given you and take your emotions out of the game. Learn the dance.

Thanks Vinod. Am hoping for more moves this afternoon, but you never know.

Just thinking out loud.

Bull or Bear? It can be very confusing and even scary. Every where I read these days, goes against Mr Cara's call of the start of the next bull market. A lot of them if not all, are even calling for one last giant plunge downwards [YIKES]. This can be scary especially if you don't decades or years of stock market experience. I compare this to what I read once about flying. When you are flying in bad weather and you cannot see out the window, you have to rely on your instruments or you will end up crashing. So I have decided to rely upon my
"Cara Gauge" and trade as a bull. But I must confess I already miss the bear market. To me it seems you could make $$$ quicker and lots of it.

re post by Bert, Bill at September 25, 2008 9:59 AM

"Bill,
While I don't disagree with you that few people are prepared for a serious contraction and what it entails.

I think people in general are saying let the contraction happen, purge the system and lets talk about a bailout of the taxpayer if necessary. As opposed to rushing to the aid of wall street, who has already been amply rewarded, at the expense of the taxpayer.

I don't think anybody disagrees that there needs to be a purge. Its really a matter of taking your medicine now or later. How much more medicine will we need later?

[Bill Cara note:

Nobody wants socialism. Nobody wants to put $700 billion (much more actually) in the hands of Washington to solve this crisis. Nobody wants to help Wall Street. But sometimes a rescue package is needed....]"

There is disagreement between Bill's call for a bailout-stimulated bull market and other commenters/analysts call for continued contraction. What is the source of this important disconnect?

Could it be because a contraction would (for most people) be:

(a) logical from a macromoney perspective (and we are getting worn out of the market being illogical)

(b) morally justified (let big mismanaged banks fail, and let new trustworthy entities step in for shareholders to invest in)

(c) it would be an emotionally appealing step towards a more moral environment to work and live in (less moral hazard, more morals)

While Bill's experience and antennae are saying:

- the corrupt system is not yet set to be purged
- lots of money will be available to reflate the stock markets for the image it presents, and that is still too important not to happen.

Are these some reasons for the disconnect? And in a time of flocks of black swans and once-in-a-century events, how much certainty can we derive from the brightest experience of the past 30-50 years?

Not having much experience, I cannot say, but I continue to try to learn.

Thanks as always to Bill, and to the community.

Bullhunter, yes, if I wanted to quote Barnum, I should have said, "never give a sucker an even break." Thanks. I think this noble gesture and unselfish acts, pulling together, reminds me of the rush to war, gulf of tonkin, weapons of mass hysteria. crapola. Just my resentful opinion.

Seems the congress would have learned something with the 7 1/2 years of experience.

Re SLW:

I don't posit anything about the "bailout", because it isn't yet. So far just a lot of maeuvering & rumouring, which gives a market caught bouncing around in a trading range.

When I comment on a chart, that's my interpretation of the price & volume patterns, that has nothing to do with the fundamentals.

I bought some SLW calls in the first place because I wanted some low risk leveraged exposure to silver. That was the fundamental call. The chart then told me that was a good entry place.

Small caps aren't moving

CDNX, Russell,VB.

hmmm.

Bull Hunter -

Re MNTA and JAV, I don't know these, but will take a quick look, maybe this weekend, to see what they are about.

I haven't looked seriously at biotech in several years. I just got tired of waisting my time, and then got probably too involved with the energy & tanker stocks.

Is a major impetus for the start of a bull market that the "helicopters" in the U.S. and other key nations have possibly agreed to increase liquidity by so much that the markets are bound to go up?

[Bill Cara note:

One of the reasons is what I have been saying regarding the huge cash that is sitting on the sidelines, itching to get to work. Monroe just sent me this e-mail:

"Cash Levels in Money Market Funds are at historic levels > > >Commenter Howard Bernstein pointed me to this chart of mutual fund cash levels. It comes to us courtesy of Navellier Research and Ned Davis Research. > > >The chart shows the ratio of money market fund assets to the market value of the S&P 500. The ratio is now nearly as high as it was in 1982, the start of the great 1982-2000 bull market. Apparently investors are showing the greatest preference for safety vs. speculation in 25 years. > > >Needless to say, this is another very bullish indication. >]

aa:

and thanks to you for your thoughtful post.

regards
joey

added to DXD at 60.42.

SLW looks less & less bullish, now it looks like it wants to go down and test the major fib @ 9.38 again.

My only exposure to it is 4 Dec. 7.50 calls, keeping them for now anyway.

Funddamental Agreement has been reached on the Bailout Package.

long BA 57.63

Thanks pappdjavul. Vital background to your observation earlier.

Anyone having a look at Bombardier (BBD/B.TO) here? Bill has favourably mentioned BBD in the past (shortly before it went on a sustained tear higher, of course), and it's now retraced pretty much 61.8% of its move from 4.06 to 8.97, currently trading at 6.16.

Daily RSI is < 30, weekly and monthly are higher though; but a recent, well-defined bottom just above $6.

For those inclined to trade Cdn stocks, might be worth a look. No position, but watching closely.

bsi87,

Thanks for letting us get inside your head.

PFE, have been trading it the last five days, basic plan is buy the dips sell the rips. Made the div plus in that time frame. I'll leave FRE/FNM to the gunslongers.

killer whale,

Actually W.C. Field's said "Never give a sucker an even break" in the movie "The Great Man" http://tinyurl.com/54b993

Barnum's contribution was "There's a sucker born every minute." http://tinyurl.com/24ghh6

Bill,

I respectfully disagree with your call for the start of a new bull market here. Maybe in nominal terms this is the bottom, but I do not expect the real inflation adjusted bottom here.

I also do not consider Marc Faber or Jim Rogers to be taking advantage of the situation. They have been saying the same thing for 6 years.

The fundamental flaw of the Paulson plan is that it assumes that buying up 2-5% of the outstanding bad loans will somehow stabilize falling asset prices and repair the capital of the banks.

Unfortunately as has been discussed in length on this blog, we are functioning under a fractional reserve banking system. Buying up 2-5% of the outstanding loans will only have an impact of improving banks capital by 0.5%-1% based on the money multiplier ($1 in capital = $10 in assets /loans).

How do you recapitalize the banking system with just $700 billion? You would have to exchange that $700 billion for actual equity in the banks that could then be used to make new loans and offset the continuing writedowns. Would this ever happen? No its too socialist for even this administration.

So its really hard for me to get on board for the bull market of a lifetime here. I can see a nice tradable rally? But I think this has to be a bottom and not THE bottom.

The most plausible thing I have read over the past 3 days is that this bailout with money we don't have sends the dollar to new alltime lows within 6 months and gold and silver much higher, as treasury yields skyrocket.

[Bill Cara note:

Re: "I respectfully disagree with your call for the start of a new bull market here."

Trading is about matching up opposing views. But, in saying its "hard for me to get on board for the bull market of a lifetime here", please don't belittle my position. I won't tolerate people who are not fair. I have continued to opine that there are serious issues underlying at least two of the ten market sectors, leading me to believe that this will be a range-bound Bull, much like the 1970's. I have never opined this Bull would be like the super-cycle period that lasted from the summer of 1982 to March-April of 2000. You all know that I have shown the courage of my convictions to stand up to call a major turn in market prices here despite the incredible numbers of analysts and traders and talking heads who are playing the opposite side. Enough said. The market is not about me or you. We are all entitled to our opinions. I respect yours, and agree with your point about inflation factors, but if you slight mine with comments like that "bull market of a lifetime" remark, you obviously don't respect mine. Sorry, but there are other places to be if that's truly the way you feel. Let's be fair, people, not just to me but to others.]

Market is acting "sell the news". Big money/bulls at lunch?

I have a better bailout proposal. Why doesn't the government nationalize these companies, paying shareholders and bondholders nothing or pennies on the dollar since that is their fair market value after subtracting all the toxic waste these companies have generated. Fire all senior staff, executives, and directors, for they should be so lucky they're not going to prison.

Why socialize for the benefit of the rich when we can socialize for the benefit of all Americans? We avoid a worldwide depression, and avoid enriching the scum who got us into this mess.

This is a much better proposal than any I've heard.

bsi87:

You're reasoning on dxd? Is it technical? If so, what chart are you looking at? Or are you just taking the opposite side of the big run up...

Thanks

Re PFE & opex, I have a memory that PFE was one of those stocks which "always" ended up exactly pegged to a strike level on opex.

How to figure out which strike level it would be ahead of time I never managed to do. If you can, it would be a gold mine.

FNM and FRE, both over $2, now marginable + no shorting? Pigs flying........

TTM -

Price is down for the day. But, just noticed that we've exceed the daily volume as of this writing, and some parties just purchased 1/2 of the daily volume in the last 10 minutes @ around 8.40. Accumulation in the works?

FRE/FNM... options worth more than shares themselves?

If you want to play a supposed uptrend what sort of timeframe/price would the call entry be?

re:PFE

The 10 day ATR is 67 cents. Difficult to make money unless the position size is huge.

guys here are telling me to expect 700 point rally when bailout package is announced?

Sure vinod 1 point for each billion pledged....;-)

re:DXD

Hammer,

Read thru my posts for today.

Shudda sold yesterday, 3rd day of down move and reloaded the gun today.

QT,

The Perk Wars
As Jack Welch's Retirement Deal Sparks An Investor Backlash, Perks Could Become The New Stock Options
Keith Naughton
NEWSWEEK
From the magazine issue dated Sep 30, 2002

I stand corrected it was Kozlowski's wastebaket. (only $2,200)

"And among the $11 million Tyco spent furnishing Kozlowski's New York apartment were such fineries as a $6,000 shower curtain, a $2,200 gilt wastebasket and a $17,100 "traveling toilette box."

But Welch had a lot of other stuff which caused a stir.

"So Welch decided to give it all back (though he'll keep his $9 million annual pension). He'll write GE a check every year for about $2.5 million for all the stuff he was getting for free--the $15 million Manhattan penthouse, the 737s, the helicopter, the limo."

http://tiny.cc/qbewf

So does gold do a swan dive through the bail out, or does the $ devaluation make it go north?

vinod

Talking heads on CNBC are saying 1000pts. Thanks for the info. Your sources have been right many times in the past.

Remember a while back when they told you we would see a Fed rate of 1.5% by uear's end? Did you see Mr Cara's comment today?

"Now it appears that the Fed will have to cut rates by a quarter point."

It just might happen.

re:gld

All I know is when I run a comparison of GLD:IEF, it's at highs. Risk is high. So gld has to drop, rates go up, or both.

Grym

$17,100 "traveling toilette box... WOOW!

I bet you he is related to some of the girls that I have dated. Which could be described as my own personal bear market, I must add.

All these investment banks, mortgage companies, insurance companies, homeowners who bought more than they could afford, people who spend more on their credit cards than they could pay back, everyone who cannot meet their obligations should go bankrupt. The government would not bail me out, you out, or any other ordinary American.

But there is a second part after bankruptcy. Bankruptcy only cancels the legal obligation of liabilities. There are still assets in all these companies and homes. These assets should be auctioned to the highest bidder. That is free market and capitalism. But the auctioning needs to be an orderly process, because the wholesale dumping of assets is oversupply that will lead to artificially low prices if done all at once. That's where the government can have a constructive role in auctioning off the assets of these bankrupt entities in an orderly fashion.

I believe the government's proposed bailout will be enacted, and then fail spectacularly. Our only insurance against this coming failure will be physical gold in our possession. Anything else is not gold insurance. The heads up that time is running out is when you see the price of spot gold and what you can buy at coin dealers far exceed the nearest futures contract.

I remember back when Vinod and me both were talking about when they were going to cut rates again this year. A few here were in shock, saying that rates were going up!

Just to think I was looking at LEHMQ.PK last week at 5 cents, and it hit 40 cents today. Oh, well, we should keep all our eyes open...

[Bill Cara note:

I relayed the reports that traders are now betting more on a rate cut. Personally, I'd be surprised they do it because that would hurt the $USD and probably not help the banks or the consumers that much. The National Rescue Plan is monetary reflation, which will already hurt the $USD. A rate cut without specific goals would be double jeopardy. Still you may be right; nothing from Washington these days seems expected.]

SteveC

I just got an email with this link inside.

http://tinyurl.com/4dyb48

Thought you might want to check it out.

Change in Dow from last Thursday's low to today's high is 6.4%.....this will be an interesting close.

or FNM and FRE at .25 and today both hit 2.76 and $2.95 today.

Noticed this, does this mean the OPM crowd is doing their EOQ window dressing?

If so, bears not welcome today . . . come back tomorrow(?).

"Trades today settle last day of the quarter, trades tomorrow settle first day of the new quarter.

Final GDP and consumer sentiment reports tomorrow."

TIMBERRRRRRR!!!!! FNM FRE bite the dust...

bought some more FXP at 86.58.
Ave cost 86.45

FRE just died.

I'm not in it but what just happened to fannie/freddie? what actually happened?

I think it is called profit taking.

What's the material change in fannie/freddie?

just bought freddie at a dollar fifty five

Wdat the heck is going on c FRE/FNM? Violent action...

FNM/FRE are owned by the government already. So I don't see bailout plan helping them. If we get a turnaround in housing, the stocks would have a material change.

80% chance of rate change in Oct.

Dr. Cosa,

Please allow me to complement your above comment re Gold with some personal impressions.

My daily routine when looking at the market is the following:

A. Look at price action tables, for several asset classes;

B. Choose some of the asset classes in which I feel something is changing

C. Look at the charts for that asset / asset class in the following order of timeframes: monthly / weekly / daily / 8 hours / hourly, and in general I am looking for signals in the shorter term timeframes which confirm what I had suspected initially looking at the broad price tables.

Now, lets do the exercise here for Gold (which you know I like to trade myself.

Having done that screening, I see that some sort of a price inflection took place on September 11th. It remains to be seen how relevant that low was.

But we can investigate further, and let the charts talk to us:

What the charts are telling me across different timeframes right now is:

- Monthly: Slow Stochastics (3;5;5) is crossing up at 44.88, with RSI - 7 rising at 55,14. CCI-20 is still in divergence, but is now already above -100.

- Weekly: Slow stochastics has already crossed well up and is now steadily at 54,23 with RSI-7 rising at 53,87, CCI-20 at 50,69. I also notice that weekly support is at 782 / 789, and weekly resistance at 934 / 940, which tells me that price is for now above support. When adding bollinger bands to the chart, I also notice that the low happened when price trespassed the lower band on September 11th. Price remains inside the Bollinger band 95% of the time, and usually when the bands are trespassed with a spike, that can signal a reverse, as was the case this time once again.

- Daily: Slow stochastics (3;5;5) crossed down, CCI-20 is pointed lower at 52,86, and RSI-7 is pointed down at 52. This tells me that some sort of correction is going on, but for confirmation and a glimpse of what kind of correction this may be, I look for other indicators. So, I start by taking a fibonacci retracement of the entire previous downswing from 988 to 736, and this tells me that today the price retraced to 50%, which is a regular retracement for a bullish movement. But I am not happy yet, so I look and the key averages of closes (MA 18, 25, 45, 100), and these are telling me that price remains above the 18, 25, and 45 DMA, which tells me that the upswing is not yet in jeopardy. Then I look for signals at the chart that give me a hint on the reason for the correction, and I see that on Sep. 22nd and 23rd the price was pushing hard against the bollinger band, signalling that the time was ripe for a breather in the rally. I also notice that daily support is at 874. Considering that the price action today took POG below daily support intraday, but the colse is going to be above (is is 876 as I write), when I am getting a bullish trigger.

But now I am curious...is this bullish trigger for real? what could happen next? Should I be long here?

Well, the some clues to future developments can be found at the shorter timeframes:

- 8 hour: Well, surprise surprise, the Slow Stochastics is embedded and may hint a possible up crossing. Hmm, that got me interested. So I look at the RSI-7, and I see that a divergence is developing, as it is pointing up at 50, and is actually joined by CCI-20, which is already pointing up, and is at -140, but climbing. I also notice that the lower bollinger band is coming up in an almost parabolic move, and is now at 837,99, and this tells me that support levels are rising fast, which is good. Finally, I peak at the 4 hour chart and see that the Slow Stochastics has turned up, which makes me feel more confident in my analysis.

- hourly chart: Slow Stochastics are rising nicely, now at 48, and this is confirmed by RSI-7 at 43 and rising, and CCI at 40 and rising.

Ok, with all this data in my hand, my conclusion is the following: The available data shows that POG has initiated a longer term upward movement, which went through a healthy correction, and is now generating the healthy signs in shorter timeframes that another upleg may be forming.

:-)

Never intended as advice, please DYODD.

Cheers all!

FRE - I got stopped out, can't trade that volatility...

I HOPE you guys bought the drop in fannie/fredie...talk about fast money yo

ALOHA !!

"IF the founding fathers were still around, they would oppose the corporate bailout. Hell, the founding fathers HATED corporations."

That is NOT true. The US government has sent the US Navy ever since the 1700s and 1800s out to protect US trade routes. They even sent the US Navy as far away as Libya to fight at Tripoli against foreign intervention of US trade. We have a long storied history in the Middle East even before OIL, but mostly all we have done there is "fight"! I guess that is the nature of things and not much has changed in 300 years except the weapons are more massive and more destructive!

The US TAXPAYER has been in continuous BAILOUT mode since 1935! The sizes of the BAILOUTS keep getting larger and larger because the leveraging is getting larger in order to find a "reasonable rate of return" combined with the disadvantage that the dollar leverages less than it did in 1912! It leverages less and less the more the US government spends and prints ...

QT
they did not say 700 point today

That was unreal on FRE/FNM...wow!

Talk about fast money!

FRE- follow the bouncing ball-> 1.30? 2.27? fortunes being made in 5 minutes?

Maromatics:

huge appreciation for your educational post!!

i am going away on vacation next week. All this talk by Bill re Hammocks, cocktails on the beach etc, has got me jealous and headed for sunnier weather. And quite frankly i am disgusted with all of the stuff going on with the economy. Here i am at 140% of quota at my job and still feel like doo doo and afraid of losing my job.

i hope the bull has begun. but as a citizen i am still enraged. and maybe i miss the biggest 1 week rally in history next week. hopefully when i get back i will have the fortitude to put my views aside and get some skin back in the market. I am finaly getting tired of being frustrated and angry.

Wow...I bought at 1.54 and sold at 2.14...

4 minutes later.

What did you guys do?

Vad,

I gotta say in the past couple weeks I feel I'm really getting more of the hang of this thing...Now what can you do to help me from selling too soon? I need discipline! Send over a Russian leather-lady to show me the error of my moneymaking ways.

QT/Boss
good that you guy remember about rate cut post
it was a opinoion of a old timer here

i went for a coffee refill..

XLI

Industrials are trading about where they were when they took off last Thursday.

GE volume is half of normal. Bullish engulfing at this point.

Be ready for anything.

shark_attack
about FNM/FRE--too hot to handle
don't have guts like you do?

vinod

CNBC was talking about when the Bailout Package is finally passed they thought a 1000pts rally was possible.

Shartk-attack,

"Vinod,

You didn't miss the train. Wait till after lunch, FRE will have corrected some, and get on for the afternoon session. .."

I was watching. Thank you.

I don't understand why people are jumping on Bill for his call on market turning. Similar thing happened in 1974, in the mids of stagflation when the market took of. He did say that financial and US stocks are not the place to invest though and will just muddle through IMHO (beside the initial short covering). The emerging markets, miners, and energy have a chance for new heights though.
The very fact that people are very negative and resist that idea proves that we reached a turning point.

maromatics,

i enjoyed your analysis,
i would add a few things and also pose some questions:

1. why doesnt anyone ever mention the MFI money flow index? on paper it seems like a dynamic RSI reading. but i rarely ever see it directly mentioned so i just assumed that most TA types ignore it for the stocks.

2. bollinger bands overlayed on short time frames seem to be a poor indicator for price action dont you find?

3. im worried that there seems to be growing concensus that gold will go up because the Fed's bailout is inflationary.

with so many people in agreement and w/ gold not going up, in fact w/ gold going down on news that the bailout is getting closer, are you concerned that in some twisted way the markets and the US dollar will rally should the bailout become reality next week (defying all reason) leaving gold to continue basing or possibly back down below $800 just to F$%K all the "last chance to board the gold train" types?

Kaimu,

The standing of corporations within federal law has changed tremendously since the founding fathers, who were very suspicious of their impact upon the commonweal.

From http://tinyurl.com/kqeb
"""
The founding fathers of the United States were not interested in giving constitutional rights to corporations. In fact, they wanted to regulate corporations very tightly because they had had bad experiences with corporations during colonial times. The crown charter corporations like the East India Company and the Hudson Bay Company had been the rulers of America. So when the constitution was written, corporations were left out of the Constitution. Responsibility for corporate chartering was given to the states. State governance was closer to the people and would enable them to keep an eye on corporations.
In the eighteenth century, corporations had very few of the powers that we now associate with them. They did not have limited liability. They did not have an unlimited life span. They were chartered for a limited period of time, say 10 or 20 years, and for a specific public purpose, such as building a bridge. Often a charter would require that, after a certain amount of time, the bridge or road be turned over to the state or the town in which it was built. Corporations were viewed differently in early America. They were required to serve the public good.
But over time people forgot that corporations ad been so powerful and that they needed to be strongly controlled. Also, corporations began to gain more power than the wealthy elite.
After the Civil War, Congress passed several constitutional amendments relating to slavery. The Thirteenth Amendment freed the slaves, the Fourteenth Amendment gave the newly freed male slaves equal protection and due process under law, and the Fifteenth Amendment gave voting rights to these same former black male slaves.
The Fourteenth Amendment used the word "person" in the body of the amendment. This caused some confusion about who "persons" were. Did women qualify? Or corporations? The Supreme Court responded by saying that the word "person" in the Fourteenth Amendment meant just black males.
That, however, wasn't the end of it. Corporations had a lot of money and a lot at stake, and they took case after case to court. In 1886, corporations gained a victory. Before the Supreme Court session to announce the decision in the case Santa Clara v. Southern Pacific Railroad, Chief Justice Waite said that the court wouldn't hear arguments on whether the Fourteenth Amendment clause on equal protection applied to corporations; they all believed that it did.
The case was decided on other grounds. But, the principle that corporations have Fourteenth Amendment rights was inserted by the Supreme Court reporter in a header in the published report of the case. A couple of years later, in the case Minneapolis & St. Louis Railroad v. Beckwith (1889), the Court cited the Santa Clara case as the precedent for corporations having due process and equal protection under the Fourteenth Amendment. With that, corporations became legal persons in the United States, and gained the ability to challenge in federal court regulatory actions at the state level.
Corporations had been looking for a way to control the process of state regulation and taxation. Now they were able to control it by having the federal government say you can't discriminate, when discrimination meant any rule that applied just to corporations, such as railroads. Of the Fourteenth Amendment cases brought before the Supreme Court between 1890 and 1910, 19 dealt with African Americans and 288 dealt with corporations. The corporations won more than 200 of these cases.
Federal regulatory agencies were also being created during this time. In 1893, corporations won a case called Nohle v. Union River Logging, which gave them Fifth Amendment due process rights against the federal as well as state governments.
For the first 100 years or so of U.S. history, Supreme Court decisions regarding corporations were made under the artificial entity corporate theory. But from 1886 or 1889 on, the justices wrote their opinions in terms of personhood, and they considered corporations to be corporate persons.
"""

Westcoaster,

Sorry about the delay responding. I have no idea why fannie trades at a different level than freddie. They seem to move pretty much in sympathy, and what works in one tends to work a few minutes later in the other. Kind of cool actually.

shark-attack,

" Wow...I bought at 1.54 and sold at 2.14...

4 minutes later.

What did you guys do?"

This is truly amazing. It closed the gap on 9/23-4 @ 1.31 and retraced to the resistance @ 2.50! I was too early @ 2.00, but exited in green (@ 2.40)! Good Call!

bsi87 -

thanks for the headsup on XLI, it is not a sector I've been watching.

Nothing I watch is acting bullish, most everything was run up just enough above obvious resistance to take out near stops above the market, then petered out. general bias still down.

That was quite a run on stops they pulled on FNM/FRE. Classic.

To continue on my previous post. Bill is not only one bright analyst/bloger sensing bottom now. He has a company in Marc Faber, Jeff Saut, and Carl Swenlin to name a few. Yes, they believe this could be just a bear rally though and not a new bull. I personally believe in a bear rally in US but true bull in commodities/energy stock. This why I followed on Bill's junior miner recommendation.

Bill's market call - THINK, people.

The point is NOT whether Bill proves right in a day, or a week or a month. The point is also NOT to defend your bearish view to the bitter end. Markets are not debating societies.

The point is that a good trader has to confront BOTH possibilities, and if you're 100% convinced either way, you are setting yourself up to be blindsided at some point.

Nobody gets it right on 100% of their calls. Buffett claims to bat no more than .400.

Bill does us all a great service by vigorously advancing a view that's counter to the common wisdom. And he DOES seem to have an uncannily good feel for the ebb and flow of markets.

On this particular call, he may be right, or may be wrong for a while. The takeaway is that we all need to take in ideas counter to our bias, and work through the resulting uncertainty to our own considered decision regarding what to do.

One chartist I know likes to turn a recently interpreted chart upside down, and see if he ends up interpreting it in the same way. It's all about mental flexibility, IMHO.

BTW, another well-known chartist, Alex Elder, two nights ago, agreed with Bill that the US stock market is likely to rally for a month or more.

"likely" - no more than that. FWIW

Wow....Freddie lost his Fannie!!!

Sorry Couldn't resist.

I caught the bullet train on FRE:

First time $1.70 - $2.20
2nd time $1.80 - $2.11 - just got out!

I wished I bought more than 1000 shares each time. Oh well, I am still siked!

Joey,

Thanks!

Dr. Cosa,

Thank you for adding further comments.

As for your questions:

- I am just not used look at the MFI, that's all. Could you perhaps post a 101 for the community to start looking at it? Thanks in advance.

- Agree that Bollinger bands do not work so well at hourly charts or below. The lowest timeframe I use it for is the 8 hours, and I feel that it stil works at that level.

- Of course I understand your worry, that is why my analysis is only technical...trying to be as cold looking at it as possible.

Concerned?

I am always concerned whenever I have one cent of my money in the market. you see, this is not an exact science, so there are no exact answers.

But we go on studying it and aim to loose less and less times, and gain more, and more times.

Cheers!

Great job b0ss! Beats working right?

I think I'm calling it a day boys...no sense giving back any of this $.

See you's jamooks tomorrow!

maro- nice post on technical indicators.Very insightful as always.

ALOHA !!

ON THE BUSH BANK PLAN
First off, if my Father were alive today he would literally be crying now. He fought in WW2 and believed in America's greatness and was a staunch Republican/conservative all his life. He would be shattered today watching BUSH begging on TV talking about panic and collapse ... So many have miscalculated the corrupt monetary system as the basis for where we are today.

Of course this BAILOUT will not work ... Its a BAND AID on a CANCER! It's a systemic disease that is only being addressed with cosmetics! Look how many times Bush has been on TV talking all about the robust US economy and as time goes by he keeps trying these ridiculous plans to get AMERICA back to its assigned global task as CONSUMER NUMERO UNO!

Yesterday I posted about how the BUSH FY Budgets since 2004 have been handing out nearly a $700mil to those "disadvantaged" who cannot come up with a 3% down payment on FHA properties. THEY CANNOT COME UP WITH 3%!!!! 3% !!!! My GOD ... 3%!!!! GET A KLUE at KLUES-R-US!! I have never put down less than 20% on a property I have bought and I have NEVER defaulted on any of them! So who is the problem and who is the solution here? This is yet more stinking "GREAT SOCIETY" type policy that has been a failure since LBJ started this WAR ON POVERTY! Look the USA has been subsidizing US POVERTY for decades and what we have to show for it is:

- $700bil BAILOUT
- CRUMBLING INFRASTRUCTURE
- ENDLESS MILITARY ADVENTURES
- POOR EDUCATIONAL SYSTEM
- UNAFFORDABLE HOUSING
- CORRUPT BANKS
- BANKRUPT SOCIAL SECURITY AND MEDICARE
- INEFFECTIVE GOVERNMENT
- LOST OR DIMINISHED CONSTITUTIONAL RIGHTS
- WALL STREET RUNNING OUR TREASURY
- BROKEN FDIC
- MORE THAN 40MIL IN POVERTY
- OVER 10MIL HOMELESS CHILDREN

reading the above list I would swear that was a list of some Third World country! I can't stand it when I hear people like OPRAH and SOROS talk about how AMERICA is the richest country on Earth! Pure BS! Why did the head of our GAO quit if we are so rich? Why is BUSH begging on TV if we are so rich? These people equate DEBT with WEALTH ... That has been the basis of the AMERICAN DREAM ... DEBT! Here is a NEWS FLASH people ... DEBT DOES NOT EQUAL WEALTH!! I repeat DEBT DOES NOT EQUAL WEALTH!! Go to KLUES-R-US OPRAH!!!

Its just an endless list of failures that I see no end to! Not just a little failure but HUGE failures! We have HUGE FAILURE because we have HUGE government. Government by itself is BROKE. Without taxes the US government would have to shut down. Government produces ZERO wealth ... it steals it from those who do produce wealth and distributes it to those who do not. This $700bil BAILOUT is yet another distribution to those who have never produced any wealth. All they have done is shuffle paper and charge a fee for it then leverage OPM until their schemes fail. THEY HAVE FAILED ... Why do they deserve another chance?

Back to Bush policies ... Anyone here remember his last winner? The STIMULUS PACKAGE where he literally gave away free money to taxpayers so they could spend the US economy into remission? How well did that work? Now here he is again, hat in hand, asking for $700bil. Recall what he said the IRAQ WAR would cost? $1.78bil ... We're into the $2tril region now with no end in sight and we have to rebuild IRAQ still and rebuild the US military equipment of all the military branches. Rommel and Montgomery found out the hard way how much machinery constant sand storms and extreme heat eats up! Rommel lost that battle due to "attrition" of everything an Army needs to win at desert warfare. I have pointed out so many times here that Al-Qaida spends $800 for an RPG29 that takes out a $20mil M1 tank! Al-Qaida has no Air Force to maintain ... no machinery, except what they can carry on their backs! The military budgets of China and Russia are on the rise and so are the US military budgets. What single entity consumes more oil than any other in the World? The US MILITARY! I predict the Chinese and Russians will close the gap in military spending between them and the USA much more rapidly than in the past. Even Bush Senior told junior not to go to IRAQ.

YOU GET WHAT YOU VOTE FOR ...

I have been warning for years about bank collapse and monetary failure as a result of the REP and DEM monopoly on political power. Either the monopoly has to end or America does! It is quite clear to me US VOTERS are choosing for America to end. That is why Is say this is the unwinding of the US EMPIRE, which can only end in a monetary crisis. You cannot cleanse banks as long as the money they produce is never cleansed.

First we need HONEST MONEY ... PERIOD! Anything other than that is a BAND AID!

Man there is a lot of discourse these days, I can barely keep up!!

A thought struck me as I started watching the Bush address last night as he talked about the necessity for credit availability for businesses and families.

I understand that credit is helpful in 'greasing the wheels' of the economy. But does it always have to be increasing credit? Why can't credit get repaid for a change, and rolled over to another company/family that needs it? Maybe credit growth should only keep up with population growth?

If we need 3% or greater credit growth to support 3% gdp growth, isn't something broken? Isn't it really just 3% growth borrowed from the future that must eventually be repaid? I know this is a gross over simplification, but makes me wonder...

Maybe it's all just a matter of perpetual inflation. I.e. credit allows your income to grow 3% this year, which you can spend on stuff the prices of which lag. Next year, stuff is 3% more expensive, but you again get your 3% raise. The masses are placated. It's almost like a perpetual motion machine, but can it continue indefinitely?

Links to Marc Faber, Jeff Saut, and Carl Swenlin Re: tradeable bottom
http://tinyurl.com/3qfwfe
http://tinyurl.com/4q3kxs
http://tinyurl.com/4v585k

ALOHA !!

IT'S STILL THE MONEY STUPID!!!

Jock,

Bill's wording is not what you refer to. At least I think so. He is referring "Secular Bull". If I interpret right, it is a long & steep up trend. If the market is going up in one or two months as Alex predicts, it makes more sense.

Don Coxe was recommending to reduce 10% equity holding. I think he is referring to a short-term avoidance. He is still recommending commodity equities. And he finally said he hoped what he said was 100% wrong. It is just an insurance. Also he said Buffet has not purchased financials yet. Well, Buffet did this week. But I still think Such movement by Buffet is psychology comfort to market. Buffet has too much cash. 5B is not a big amount, in a relative term. And the return is guaranteed. It is not a big idea for him.

kaimu..."YOU GET WHAT YOU VOTE FOR .."
http://tinyurl.com/59o6hd

Me too!...
I caught the bullet train on FRE:

First time $.48 - $.72. then missed big rise
2nd time $1.80 - $2.80 - got stopped out and thats ok!

can't do this and leave the the computer thats fo sure

ALOHA !!

Buffet in 2005 bet $19bil the USDX would go down. HE LOST! He traded 130mil ounces of silver for the US government to dump their probe into GENERAL RE! He knows who is boss ... Yes, $5bil isn't much to lose compared to what he has lost betting against FALSE WEALTH! Besides this is a chip he can use when AMEX needs a bailout!

Regulator:GSEs Could Participate In Treasury Plan To Buy Toxic Assets

15:35 EDT Thursday, September 25, 2008

WASHINGTON -(Dow Jones)- The regulator for Fannie Mae (FNM) and Freddie Mac ( FRE) said Thursday that the mortgage giants could participate in the U.S. Treasury Department's proposal to buy Wall Street companies' soured mortgage assets.

"In theory, some of their securities could be purchased as part of this program," Federal Housing Finance Agency Director James Lockhart told reporters after testifying before the House Financial Services Committee on his agency's takeover of the firms. "There's a variety of ways they could work together."

Asked whether this would be merely a cosmetic shift since the government took control of the firms earlier this month, Lockhart said it wouldn't.

"Fannie and Freddie's books are not the government's books. Fannie and Freddie's books are Fannie and Freddie's books," he said.

In prepared remarks to the committee, new Fannie Mae Chief Executive Herb Allison said that his company was "working closely with FHFA and Treasury to assist in government efforts," which he said included the Treasury proposal to buy toxic mortgage assets from banks.

DJIA
1st half hour up 180 pts, last hour down 20 pts.
Big boys didn't get excited about taking home long positions.

Naz
1st half hour up 29 pts
Last hour down 5 pts

Russell 2000
1st half hour up 8 pts
last hour down 1.5

bsi...thanks for your observations on PFE earlier and pointing out this pattern to watch at the open and close....it has been helpful.

long RIMM at 83.99

Dang, RIMM is not doing so well! I own a tiny number of shares @ $100, but still hurting 18% here!

Anyone else feel this is too reactionary? Their outlook wasn't all that bad. 89c-97c for Fiscal Q3 on 2.95-3.1B revenue vs. 97c on 2.9B analyst expectations!

I average down on RIMM... bought at $82, average is $91.

Kaimu - FYI

I enjoy your entertaining and educating rants incredibly! Incidentally, a recent newspaper article (Globe and Mail I believe) suggested that honey was cure for MRSA and exposure to pigs was
a suspected source of the affliction. Stay healthy! Cheers!

Not sure if these details have been posted here on the bailout.
http://tinyurl.com/3wudgb

Bill,

You mentioned Obama saying in his news conference that we need alternative energy and education and so forth. You see this as a sign that, "He gets it."

I see this as Obama, knows what "he gets" is what to say. Obama is a smart guy, but that is a lot different than being sincere, honest, or capable.

McCain is a military hero, but even if he is honest and sincere, that doesn't mean he is smart.

I would say Ron Paul, "Gets it." But I voted for Perot when I believed he got it. What i got was eight years of Bill Clinton who was a smart guy like Obama, but insincere, dishonest and capable of saying or doing anything which satisfied Bill Clinton's wants and desires.

We simply will not ever elect anyone who dares to speak the truth as he sees it because we are fragmented into a bunch of special interest groups some of who a truly honest and open person would be bound to offend. AND a media intent on creating controversy over things like lipstick on a pig, not enough caring about polar bears, and any other stupid topic they can turn into an issue.

A really serious financial downturn may cause people to confront the important things in life if we allow it to shake the foundations.

Buy 100 Shares of RIMM
Details Filled at $81.40

Embargo announced on Chinese banks lending to US banks; looks like they either do not trust or do not understand the current bailout plan. I would venture it's the former. There goes more liquidity.

http://tinyurl.com/5xkcr9 (complete article below)

BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.

The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.

"The decree appears to be Beijing's first attempt to erect defences against the deepening U.S. financial meltdown after the mainland's major lenders reported billions of U.S. dollars in exposure to the credit crisis," the SCMP said.

A spokesman for the CBRC had no immediate comment. (Reporting by Alan Wheatley and Langi Chiang; editing by Ken Wills)

Speaking of Oprah, I thought I heard Suz Ormann tell the audience to buy treasuries... I wondered why but didn't catch her reasoning but I think she's very wrong.

SteveC,

There was a time when people (or at least a few individuals) did not see bankruptcy as absolving a contract they had made. Truman, when his clothing store partnership failed, paid off all his debts over a period of years. As a Senator, early in WW2, he held Glen Martin's feet the fire regardless of contract details when the B-26 "Widowmaker" bomber was killing pilots and crews.

Eddy Rickenbacher paid all his debts when his auto company folded. He then went on to found Eastern Airlines.

We need leaders who insist on ethical, responsible performance and make a serious attempt to fulfill the goals stated in the Preamble to our Constitution — including the promoting of the "general welfare" — not just for a select few.

In leu of that, I'm with you on gold as an insurance policy.

Senator Shelby just emerged from the White House bailout meeting
...he held up a sheath of papers and said " I have five pages of individual economists from across the nation saying the bailout plan was bad. He said he asked if Ben and Hank had considered any other alternatives his question was met with silence. Shelby said the plan was flawed from the beginning.

SteveC,

There was a time when people (or at least a few individuals) did not see bankruptcy as absolving a contract they had made. Truman, when his clothing store partnership failed, paid off all his debts over a period of years. As a Senator, early in WW2, he held Glen Martin's feet the fire regardless of contract details when the B-26 "Widowmaker" bomber was killing pilots and crews.

Eddy Rickenbacher paid all his debts when his auto company folded. He then went on to found Eastern Airlines.

We need leaders who insist on ethical, responsible performance and make a serious attempt to fulfill the goals stated in the Preamble to our Constitution — including the promoting of the "general welfare" — not just for a select few.

In lieu of that, I'm with you on gold as an insurance policy.

Hey Grym:

Laws are used as an absolution for morality. You mentioned how maybe an economic crash would rearrange priorities-more than likely. I've always cringe when I look down a supermarket aisle and see it's entire length lined top to bottom with soft drinks or pet food. Don't get me wrong, I love animals-more than people as a rule-no deceit. But a society that can afford such "luxury" has issues. Friends of mine told me about people they know in Florida who give their daughter's breast enhancements as a graduation present from high school. Yeah...we've got issues

Commodities - Still hanging onto my oil short, but almost let it go as it's a huge anchor on my port and starboard.

What do you guys use for AH or Pre-Market trading?

Hi,

CNBC's website is saying no deal.

http://www.cnbc.com/id/26885273

Is this true?

Is this final?

Thanks in advance...

Cheers!

Grym - If I hear you correctly, you are saying you resent the notion of someone who supposedly represents your best interests giving your money away freely to a banking system which has proven itself very adept at loosing other peoples money.

I couldn't agree more, and I don't support that either!

Maromatics:
This is politics. It's not final by any means. On Fast Money (CNBC show) Guy Adami stated what I've been thinking all day - that John McCain will somehow be made into a hero by saving the bill or making a compromise that will allow him and the Republican Party to resurrect their campaigns from what has been looking increasingly like a total failure.

Schleppy,

I use Interactive Brokers here in Canada. There's a STK trading flag you can set that allows orders to go through in AH. Same for Pre-market.

Maro,

Nothing is set in stone yet. CNBC is spinning the news as we all wait. Sen. Shelby camout around 5pm saying that he's not agreeing the plan and deal is not settled yet. News Media is "interpreting" that being no deal. It is a guessing game right now for the bystanders.

I have to give a little credit to CNBC today at least they are trying to educate the public that this is not a bailout of banks and riches, it is to bail out credit system.

C3,

Ok.

Thank you for your care.

RDR,

Thanks too.

And Bill Gross already saying banks need another $0.5T after these $0.7T:

"The banking system needs another $500 billion to survive beyond the $700 billion rescue plan being contemplated by Congress, said Pimco founder Bill Gross.

Gross said on CNBC that the government bailout plan will help free up bank balance sheets so they can start lending again, but will provide only about $50 billion in real capital to the system."

... which is peanuts.

Open up your wallets wide if this deal gets approved.

There are certainly people questioning Bill's bullish bent now. He may have nailed the reversal to the hour and day, he may be early, or he may be way early. What I do appreciate is getting the 2x4 to the side of head to get my attention while he tells me to "Wake up, not everything is still going down!" So yes, I'm putting money to work now that has been doing nothing for a long while, but I'm also hedging the downside. Options are now suddenly an important part of my investing whereas in the past they were a foreign concept.

So for me, whether he hit the exact low or not isn't important. It woke me up from listening to all the doom and gloom and doing nothing, and made me think about what I would do given different scenarios. That is what I find enlightening.

The other hard part I have with doing nothing right now is because of the length of time I have followed Bill's blog. There have been too many times over the past years that I have sat and questioned his thinking, only to see that he was right and I missed out on a huge move. I don't believe he is saying the whole market is going higher. But I believe he is saying that specific stocks, in specific industries, will do well going forward IN SPITE OF the rest of the market. Then if you learn how to sell puts on those stocks you can increase your yearly return and do well regardless of what the DOW does. Hopefully I have read correctly what he is getting at.

125,000 shares of RIMM just crossed at 79.58.

I am posting this article as it seems the Administration is generating FEAR amongst the voting public again to try to retain political power as reflected in the President's speech last night.

Bailout is financial equivalent of the Patriot Act
By Andrew Ross Sorkin
Tuesday, September 23, 2008
NEW YORK: The passage is stunning:

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency," the original draft of the proposed bill says.

And with those words, the Treasury secretary - whoever that may be in a few months - would be vested with perhaps the most incredible powers ever bestowed on one person over the economic and financial life of the United States. It is the financial equivalent of the Patriot Act, after 9/11.

Treasury Secretary Henry Paulson Jr.'s $700 billion proposal to bail out Wall Street is both the biggest rescue and the most amazing power grab in the history of the American economy.

In many ways, it is classic Wall Street: a big, bold roll of the dice that one trade can save the day. But at the same time, the hypocrisy is thick. The lack of transparency and oversight that got our financial system in trouble in the first place seems written directly into the proposed bill, known as TARP, or the Troubled Asset Relief Program.

Just take a look at the original draft: "The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this act," the proposed bill read when it was first presented to Congress, "without regard to any other provision of law regarding public contracts."

It goes on to say, "Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure."

Slowly but surely, as new versions of the bill are making the rounds in Washington, some legislators are pressing to include new language to give them at least a modicum of oversight. Democrats have complained that the bill gives the Treasury Department "a blank check" - and they're right.

But given the rush to push the bill through, even if Congress cobbles together some oversight language, it will almost surely be inadequate.

Joshua Rosner, a managing director at Graham Fisher, says TARP should stand for "Total Abdication of Responsibility to the Public." He calls it "a clear abdication of all congressional oversight and fiscal authorities to a secretary of Treasury that has bungled this crisis from the beginning."

He argues that the bill grants "greater powers to the secretary of the Treasury than even the president enjoys."

The bigger issue is that the bill effectively creates protections not just for the Treasury, but for the executives on Wall Street who created this near Armageddon. Rosner says the draft bill "prevents judicial review that could allow the protection of decisions that create false marks, hide prior marks, or could be used to prevent civil or criminal prosecution in situations where a management knowingly provided false marks that aided the growth of this crisis of confidence."

False marks - using mark-to-market accounting to hide the true value of security, rather than disclose it honestly - has a lot to do with why Jeffrey Skilling, the former Enron chief executive, is in jail.

It is absolutely true, of course, that Paulson needed to do something. By Thursday afternoon, less than 48 hours after the bailout of American International Group, the financial system was near meltdown. The mere rumor that Paulson and the Federal Reserve chairman, Ben Bernanke, were devising a big bailout fund cause the stock market to soar.

In truth, I'm not sure I agree with Rosner's assessment of Paulson's job performance. I think he is one of the most competent Treasury secretaries we've ever had, and it is hard to imagine anyone else handling this crisis any better. His predecessors, who lacked his grounding in the world of high finance, would most likely have been like deer in headlights.

And when Paulson says, as he did on all the television talk shows Sunday, "I hate the fact that we have to do it, but it's better than the alternative," I believe him. (It would have looked better, of course, if he had come up with this plan before it looked as if his former firm, Goldman Sachs, was in jeopardy.)

But the question on the table now is whether the government's latest response to this crisis - the way it has been constructed, and frankly, the way it is being crammed down everyone's throat at the eleventh hour - is the right approach. Already the market has its doubts; just look at its performance Monday.

Let put aside the bill's most offensive aspect - the raw power it gives the Treasury Department, and the lack of oversight it provides - and take a closer look at the practicalities. First off, there is nothing in the bill that will prevent these problems from happening again.

The bill doesn't address adding greater transparency in investments in subprime loans and securities and credit derivatives, which led directly to the debacles at Lehman and AIG. The bill does nothing to rein in the credit-default swap market, which has turned out to be the weapon of financial mass destruction that Warren Buffett always said it was.

Nor are the Democrats going to help matters with their own changes.

It is all well and good that they hope to use the bill to restrain executive compensation, and add stipulations to help people in danger of losing their homes. But nothing the Democrats have suggested so far tackles the core issues of oversight, transparency or regulation.

Of course, the sickest part is that Wall Street is lining up at the trough for a piece of the action, lobbying to run some of the $700 billion fund - and take huge fees - for their own mess.

However the bailout is structured, no matter what safeguards are put in place, it is likely to be a conflicted mess. How can we possibly trust that the price the government agrees to buy the securities will be fair?

And then there is the jockeying among the banks so they can sell their absolute worst stuff to the government - even loans that have nothing to do with mortgages - and change the rules in the process.

The Financial Services Roundtable, which represents big financial services companies, wrote an e-mail message to members Sunday suggesting, laughably, that "the government bid for the assets should not count as a mark-to-market value for accounting purposes."

In other words, if the government drives a hard bargain - as it should - the banks don't have to take write-downs based on the price the feds pay to take junk off their balance sheets.

Watching Wall Street double-dip makes even some in the industry's top tier cringe.

"Maybe I should move to Russia," one titan of finance said to me. "It's obscene, the whole thing. I'm embarrassed for myself."

Actually, I've got a better suggestion: Venezuela.

On Friday last week, Hugo Chávez, the Socialist president of Venezuela, gave a speech in Caracas where, according to Reuters, he said, "The United States has spent $900 billion, four times what Venezuela produces in a year, to try to boost the troubled finance system and housing market."

Gloating, he added: "They have criticized me, especially in the United States, for nationalizing a great company, Cantv, that didn't even cost $1.5 billion."

FRE & FNM up big after hours again today.

Jock
I was gone this afternoon driving and wanted to get my thoughts down before they disappeared. If I had read the comments I missed, I would have seen you had said it well earlier.

Should be a dead cat bounce on RIMM after the bail out is announce, but if it break's 75 it might head to 60

From a former Japanese Treasury official who oversaw the restructuring of the Japanese economy following the bursting of the 'bubble economy' there in the early 80's:

"One is struck by the optimism that is issuing from certain American officials following the proposed bailout agreement. It's as if they've finally made it over the hill...except that on the other side lies the Himalayas."

China does not ban the inter-bank loan.
Here is the denial on its official website - Xinhua Net

http://tinyurl.com/China-no-ban

Link to the protest letter (Apparently the one held by Senator Shelby)
http://tinyurl.com/economist-protest

Link to Bloomberg article re: "Tax on Trades Should Be Part of Rescue Plan, Some Democrats Say"
http://tinyurl.com/42tmks
``The same Wall Street speculators and investors who are principally responsible for having caused this avoidable financial crisis and profited from it must now be required to pay for it, not U.S. taxpayers,'' according to the letter, which was signed by Representative Peter DeFazio, an Oregon Democrat, and Representative Pete Stark, a California Democrat.
I linked to a C-span speech by Rep. DeFazio last night

here is my TA for the GLD,
just some experimentation using Exponential Moving averages where i found some interesting patterns
we are at a turning point both technically on the charts and fundamentally w/ the state of the economic landscape in the US.

as i posted before, i am concerned that many of us assume that the current bailout plan is inflationary in the sense that it will weaken the dollar which would lift gold. w/ the way the US dollar has behaved as of late i can only say that nothing seems to be acting as it should, and that while im bullish on gold and hope for a run past $1000, i am concerned greatly that part of this plan may include unprecedented action to further crush the commodity sector and protect the dollar which underpin's the entire basis of the bailout plan.

with god's speed:
(or should i say "gold's speed"?)

http://i34.tinypic.com/25zhw74.jpg

This market trades on politics at this point. Therefor it is impossible to guess from one day to the next where it is going. Tomorrow is likely to reverse all of today's gains on the basis of an impasse on the bailout. I sit mostly in cash at this point, because altho I respect Bill's call, echoed by others I also respect, I believe that it is politics and the unpredictability of politics that will determine the direction of the market over the next 5 weeks. If the bailout is not forthcoming, the market will likely fall much further.

US to Lose Financial Superpower Status: Germany
By Reuters | 25 Sep 2008 | 07:39 AM ET

Germany blamed the United States on Thursday for spawning the global financial crisis with a blind drive for higher profits and said it would now have to accept greater market regulation and a loss of its financial superpower status.

In some of the toughest language since the crisis threw Wall Street banks into financial disarray earlier this month, German Finance Minister Peer Steinbrueck told parliament the turmoil would leave “deep marks” on both sides of the Atlantic, but called it primarily an American problem.

“The world will never be as it was before the crisis,” Steinbrueck, a deputy leader of the centre-left Social Democrats (SPD), told the Bundestag lower house.

“The United States will lose its superpower status in the world financial system. The world financial system will become more multi-polar,” he said.

Chancellor Angela Merkel, whose conservatives rule in coalition with the SPD, and Steinbrueck both pushed the Group of Eight (G8) to agree measures to boost financial market transparency during Germany’s presidency of the G8 last year.

But their drive collapsed amid opposition from Washington and London.

http://tinyurl.com/RateCut-To-Offset-Risks

What do tbey know?

Bloomberg: "More than 150 prominent U.S. economists, including three Nobel Prize winners, urged Congress to hold off on passing a $700 billion financial market rescue plan until it can be studied more closely.

In a letter yesterday to congressional leaders, 166 academic economists said they oppose Treasury Secretary Henry Paulson's plan because it's a ``subsidy'' for business, it's ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation. "

Quenstusrex, do you have any videos of the protests in Seattle?

I don't have video of my own. Although I might drive back over to get some... Here are some of the local news networks that are covering the event.

http://www.komonews.com/news/18783769.html

Deal or no deal...LOL.

Oops, wrong link. I wish there was an edit feature.

SiO2,

The protests just 'officially' started at 4pm, about half an hour ago. Komo is covering it right now.

It sounds like the protests are targeting financial industry employees when they leave work. I think some of the protesters in Seattle decided to protest the employees as they go into work too.

great cover

http://www.economist.com/

anyone for some WM?

"Bailout deal breaks down; Bernanke back to Capitol"
http://tinyurl.com/4uvkpr

'Major' GOP opposition to bailout plan remains
http://tinyurl.com/4dnlko

New Poster. Have been reading since January. Much thanks to Bill and community for insight and education.
Came across this bit of satire on Financial Sense, by Eric Andrews.
www.financialsense.com/fsu/editorials/12008/0925.html

JP Morgan just bought WAMU assets, branches and deposits from FDIC. hmmm. why would wamu rollover in the midst of the mother of all bailouts?

WAMU branches will be open tomorrow. I have a small account over there and will surely be there to close down my wamu acct. unreal.

http://tinyurl.com/3vzoq3

maybe they let wachovia, and several others to go belly up and absorbed into GS and JPM, prior to the bailout approval. then the money only needs to go to 2 institutions. i am only half joking.

ugh! I'm getting a bit overwhelmed in my stock research this evening; finding too many good companies, at good prices, showing all sorts of positive divergences. I find this happening to me all the time at market turning points. I was really hoping this time to avoid my usual response which is just to give up in exhaustion, only to watch most of the profit-opportunities run away from me... I need a simplifying plan. :(

JPMorgan Chase Announces Investor Conference Call

New York, September 25, 2008 - JPMorgan Chase & Co. (NYSE: JPM) will host a conference call at 9:15 p.m. (Eastern Time) tonight, September 25, 2008. You may access the conference call by dialing 1-877-238-4671 (U.S. and Canada) / 1-719-785-5594 (International) - access code: 814030 or via live audio webcast at www.jpmorganchase.com under Investor Relations/Investor Presentations.

JPM got Bear Stearns. JPM got WAMU. JPM is the largest holder of credit default and interest swaps. Any connection? Did JPM simply come out on the right side of all these deals?

Nemo, CP,

Breast enhancements for graduation! Oh, brother.

What kind of life perspective we have come to. People are outdoing each other with birthday parties for kids for the cost of what was a wedding expense a few years ago and weddings for what was the price of a home.

Yeah, I know we've had inflation, but apparently we are suffering a lot of deflation in the human brain dept.

I saw an article claiming that in Spain their was a bill introduced to give primates equal rights with humans since our DNA is so close. If true, we may see a better class of presidential and congressional candidate before long :-)

Hmmm, I suppose chimps will be entitled to breast enhancement and weddings.

Sorry, this is getting too weird. It's been a long day watching too much news—think I'd better quit.

I gave up reading the news today - this morning - when I read that some young girl in the US got hit by a train when she sat down on the tracks to talk on her cellphone.

Mack,
Drew same conclusion today...gonna let Cara Traders navigate in this this market for us, with all respect to Vinod : ). Fees apply only if profits occur (Sort of the opposite of the bailout proposition).

Evening Folks,

For the record, Fannies last trade today was 29 cents below the close, Freddie traded 10 cents below the close. Along these lines, Washington Mutual was 45 cents total value at the end of AH trading today. It really is the case that the whole world is sitting on pins and needles right now waiting for this "bailout". Stocks have no inherent direction, we are all waiting to see what happens in congress. Deal, and stocks go up. No deal, and they sell off hard. In fact, if they don't do a deal tonight or tomorrow I'm sure stocks will sell off pretty good tomorrow afternoon.

Seen the Dow futures? Down 130 as I write. This market needs a deal or value will adjust downward tomorrow. I am just glad that I have you guys to bounce ideas off of. And one of these years, we're gonna get together for the party of all parties, a Cara Convention of the highest order. Drinks are on Kaimu:)

Re: Don Coxe & Faber

There is a lot misinterpretation on Don Coxe's comments. As someone who has followed his work and Marc Faber's work and talks to them both frequently over e-mail I feel I have to set the record straight.

Coxe only reduced equity exposure by 10% for pension fund clients and that was a recommendation based on potential risk based on the TED spread which has served him well for 40 years. There is a possibility of a crash. That is all he is saying on that. A possibility so for some clients who could not weather certain risks and who have rules to follow on allocation in times of uncertainty.

As he says virtually on every single call, he is wildly overweight commodities and believes this is a historic buying opportunity. This published as a part of a 2 page alert on Sept. 16th reflects his views:

"For long-term investors, this is potentially a career-defining opportunity. Those who believe that what they believed a few weeks ago is still true have a chance to buy at prices they didn’t
expect to see again. For those who never believed the story, there is that glorious secret pleasure of being proved right—at last."

As for Faber. He sees potential for slight deflation after this bailout and then a reflation taking everything up in nominal terms. In fact if you read what he actually says he always repeats this. The problem is that people just read 'the Dow won't be going to new real highs anytime soon - that is fantasy' and people confuse real gains with nominal gains. There is a large difference and that is the focus of a commodity bull market during a continuing prosperity driven inflationary era. Read: Gains in real terms.

Coxe is not seeing the opposite of Bill. Faber is not seeing the opposite of Bill. Rather they both see the CHANCE of a deflation but appear to ACTING on the odds on a renewed bull.

"Coxe is not seeing the opposite of Bill. Faber is not seeing the opposite of Bill. Rather they both see the CHANCE of a deflation but appear to ACTING on the odds on a renewed bull."

I don't know Faber, but being a wildly enthusiastic follower of both Cara and Coxe, I agree. I see no particular disagreement in what either of them have been saying over the last 7 days.

Specifically, Coxe is saying "risk is high now" and Cara is saying "buy now". Is there a serious trader on this forum who doesn't understand that the best returns are achieved in an enviroment of high risk? Or to put it in Vadym's words: "...what makes the market for any trade to occur, there has to be ... disagreement on direction"

Coxe: Someone mentioned the other day that you could view his holdings. I searched BMO and could not find, does anyone know or have a link?

TIA

I can assume that some of his picks would be these, but I like viewing the holdings of others.

TOT
CAT
DNR
RIG
DO
SLB
BHP
RJA
NE
RIO
POT
SYT

IGE
BTU
DE

the numbe ri posted does not work. and i cant get to www.jpmorganchase.com. hmm?

In the field report:

Portfolios: currently greater than 80% cash. (1) Investment account and (2) retirement accounts.
Buy/Sell: buying small, mostly initial positions
Bull/Bear: moderately Bearish
Frame of mind: member of DENSA / hold for the medium term (1 month) or longer. Dancing
market bottom? don't know, don't care - acknowledge we are at a turning point (see comment below).
Methodology: using technical analysis on Fundamentally strong businesses - EMAs then Bollinger + MACD then + Stochastic then + RSI

market view:
I am changing my Bull/Bear position from [mostly Bearish] to [moderately Bearish]. The stock prices are not very reliable when using Technical Analysis with the amount of volatility recently (in my opinion). But I like what I am seeing. Indicators are showing changes to favourable trends (up) from uncertain trends.

An agreement is good news even if it is not the political result I would (or others) like to see. Sentiment is important here as we don't know what the details of implementation are and I don't know how to begin "figuring it out".

Bought today an ETF position favourable to the gold mining stocks going down from here. Purchase is a small initial position. Stock is Canadian listed. Not interested in buying penny stocks under $5.00 at this time, although a number of junior mining stocks discussed in this blog look technically favourable for a move up from here (I will welcome that move for my current holdings in this area as I believe these stocks are good to sell into rallies here even if a loss is taken on the position).

The bull and bear debate is great, but like yesterday's donut it is getting stale. In my perspective you will never get all equity stocks (leave out reverse ETFs or tradables I/we don't understand) hitting their lows on the same day of the same month of the same year. There are excellent stocks out there that are worthy of the bull/bear debate. I can't trade or invest in likes or dislikes. For me this is a matter of a progression from being 90% in cash to being fully invested to, for some traders, being at 150% plus by using margin or options. I don't understand hedge funds, but I assume that these funds are the hurricanes of the stock market because the positions can/are both long and short.... bullish and bearish at the same time with different sectors or within sectors. All of which would lead me to get the humungous headache that I want to avoid.

kudos to bsi87 and maromatics for explaining technical techniques for our enlightenment. [057]

Still relatively new to the Cara Community. Could someone please explain the Cara 100 Daily RSI-7 Charts signaling system.
For example when RSI<30 does Accumulation Zone signal come first then the Buy signal?

Ex:ERTS & AET today had a Accumulation Zone
1 day signal. Will the Buy signal follow at some point later?

Thank you

got it!

http://tinyurl.com/3qmaue

"Specifically, Coxe is saying "risk is high now" and Cara is saying "buy now"

Buffet said to buy when blood is on the street and he did 2 deals in two weeks. So, we have tripple confirmation :)

JPM assesess WAMU takeover as worth NAV of +$2B

Seems to me Republicans/McCain are trying to position themselves against the deal to let Democrats pass it so they can use that in the campaign. I would think they would let it go through as they don't want the blame for an economic/stock market collapse. But you never know.

Robyn:

This will make it easy on you :)

http://rsi.caracommunity.com/RSIApp/RSIApp.html#fxp

Oh, I gather you have it. Just check signals daily or on charting software. They may signal buy at some point, maybe not.

MSNBC reporting that Republicans will not even participate in tonight's bailout meeting.

Should be an interesting day in the markets tomorrow.

JPM/WM - Took advantage of today's rock slide, it appears.

The statistics Marc Faber quotes in this interview are astounding:

http://tinyurl.com/4vzrfa

It really puts some perspective on the bailout.

Interesting take on the proposed bailout from Colin Twiggs:

"Congress is chewing over Henry Paulson's $700 billion bank rescue plan. Everyone is angry that the crisis has occurred and the natural reaction is to seek revenge — to ensure that bankers pay the price for their follies. By vetoing the rescue plan they will succeed in this, but there are further consequences: Main Street will pay a far bigger price than Wall Street.

In 1929 the Fed's attitude was to let the banks fail. Repeated failures, however, caused investors to lose faith in the banking system. Withdrawal of deposits forced banks to withdraw credit from borrowers. Borrowers, forced to liquidate assets, drove down asset prices. This in turn set off another round of bank failures. A downward spiral commenced, with waves of bank failures, collapsing asset prices and rapid contraction of demand and production. The Great Depression lasted almost ten years — and a similar scenario should be avoided at all costs.

The best way to prevent a repeat is to take immediate action to restore confidence in the banking system. While Congress do not want to give Henry Paulson a blank check, he has shown greater leadership than anyone else on this issue. As well as demonstrating a keen interest in protecting taxpayers . In fact we will all be deeply indebted to him if he is able to pull this off."

Wonder what's behind curtain number 3? Will JPM finance their purchase with taxpayer money? Next week starts with Jewish holiday, so any bailout deals might get pushed out to mid next week if they're not agreed by Sunday 9/28...

think carefully before making the assumption paulson is out to destroy the taxpayer...a real failure will adversely affect millions of people in the US, including people you know/work with, more than a few you only think you know, and perhaps even a few you care deeply about...

Shark,
I agree totally with you 8:48 post. The tension is palpable out here!! We're tightening the coil so tight with all this political posturing that when it breaks it will roar like Bill says.

I'm positioned pretty well in SLW calls and DIA calls that are March expiration.

I would prefer no bailout but I think the writing is on the wall. How much money do we give these people making the decisions and how much money does GS, JPM, BAC, C, and MS give them?

Add it up and you'll see where they'll cast their vote and spend our money.

And I do think it would be great to have a Cara Community Party sometime. I would love to buy many of you a drink in thanks after I buy Bill as many as he wants.

Cheers.

Rob.

2nd,

I agree about at least one or two things.

1) Many American banks and brokers have already "failed" or in the process of failing now.

2) If the bailout does not go through we will see a credit contraction that will be reminiscent of the Great Depression.

But I have a question...Where's the 5 billion dollars that Lehman paid each other in Christmas funny money less than a year ago when their fate was palpable to all those in positions of power. I mean, what did they say, "Great job guys, you ruined the bank, here's 5 billion, spend it in good health?

So I agree that something along the lines of the bailout is necessary, but let me ask you a question...If we the taxpayers do this bailout, how long will it be until Wall Street pays each other the big crazy bonuses again? Would they be brazen enuff to do it this very year?

I say, help them, but make them help themselves as well. And if they pull out of this thing we should have an equity position in these firms. If we're gonna nationalize the debt, let's sure as....heck nationalize some of the upside if/when this thing ever recovers.

Also consider the difference between a DOW of 10k vs 11k where we're at now.... Much greater potential gains for those who are waiting for a lower DOW if that should occur.

My 2 cents probably isn't worth much, but here is what I'm thinking. Congress should put the $700 Billion into the FDIC and allow the banks to fail. This will allow the FDIC to take care of the depositors, thus people won't lose faith in the system. But it would still allow the companies to fail and it will get people to start asking the right questions of their banks.

Could the FDIC raise the amount insured if it got a gift of $700 billion?

Kaimu,
Your post at 3:24 is awesome! I love it!!

And I agree totally!!

I'm thinking that Ron Paul still may have a chance in November with the entire system falling apart and Bush literally begging for our money on public TV.

It really makes me mad that people didn't listen to him in the early stages. They just wanted to keep the debt party rolling and he wanted to cut off the power.

If we really do descend into a full-scale depression we'll be wishing for someone like Ron Paul to step up and lead us.

Rob.

According to WSJ, it was the "House Republicans" who are revolting the deal. All boil down to politics. Now the democrates are blaming McCain for the failed deal. I guess the market might have to crash in order to send a signal - the max pain theory but this time everyone pays, not just wall st.

probably better off keeping the banks from failing in the first place Q.

When it comes to politics billion there and billions there does not matter. Also it does not matter what economy is doing or will do. Ideology matters more to politician than anything else even though if same ideology brought us to this point in financial market.
Sensing political favorite environments it was
ME/MS/GS/BSC who push change in rule which was 12 to 1 leverage to 40 to 1
Well. Where re they now?

Quentusrex,
I'll go a step farther and wish they wouldn't waste any money on failing institutions and instead save all the "taxpayer" money for building up the strong banks and brokers that survive after the weak banks and brokers fail. So, when Bank Of America fails we have money to build the next strongest bank into the new BAC. How else do we expect to get a strong financial system?

And the FDIC should handle disposing of the holdings of the failed brokerages along with the banks. The FDIC does a stellar job and we would be much better off if they were in charge of the SEC as well.

Rob.

Just trying to make sense of the current situation, the market's latest folly is again all based upon Paulson's appearance waving his arms for another capital injection. Makes me wonder where we'd be if he hadn't done this, more than likely higher?

"The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold," Bush said. "More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically."

Fearmongering... if somebody asked me to ponie up $700 billion I would be getting at least 2 more quotes. That kind of money buys lots of hat racks and wastepaper baskets.

Scare tactics are great for controlling the populous, not so great for convincing Congress to hand over $700 billion. That's more than the war in Iraq.

http://zfacts.com/p/447.html

I like our PM's response to the situation.

Conservative leader Stephen Harper said a bailout plan was not necessary in Canada.

"We'll be fine as long as we don't do stupid things," he said.

http://tinyurl.com/3obmfu

Are we gonna nationalize RIMM tomorrow? :)

I think the Sunday bailout plan seems to be in the script, as the last few "emergency" actions have been over the weekends. I would hope they setup a new organization with a limited amount of power & $$$ to figure out how to unseize the markets, and phase out the Fed somehow as it didn't do it's job.

"The Federal Reserve currently has two legislated goals--price stability and full employment"

Paulson should step down. Bernanke should step down. Greenspan should step down... too late.

What would be wrong with having a Fed Reserve run by Bill Gates, Warren Buffett, and maybe Warren's sidekick Charlie Munger?

From what I understand, traders used to experience shock and awe at the Fed's every word. Then they started releasing minutes to their meetings. After all of the new-found transparency and knee-jerk reactions to various financial emergencies, I think that the mystery is gone. The Fed has lost its mojo, and is bringing the US down with it.

Or is it Basel II capital requirements.

http://tinyurl.com/4ggak7

VaR & Lehman Bros. An excellent article detailing the crunch and how valuations & risk management regulations have blown up most of the major investment banks.

"Traditionally, the maximum leverage for Wall Street broker-dealers was held to be 20 to 1. That level was always fudged a bit, partly by pretending that so-called “subordinated” debt was the equivalent of equity, which it obviously isn’t. So, while this 20-to-1 ratio is fine when your assets consist of commercial paper, bonds and shares that can be more-easily valued because they are more-liquid and trade every day, it is far too high when the asset mix has come to include investment real estate, private equity stakes, hedge fund positions, credit default swaps and other derivatives positions that do not even appear on the balance sheet.

Scaling up from 20 to 1 to 30 to 1 - as Lehman did - is asking for trouble."

http://tinyurl.com/3n76yy

If you had to value your house every single day to show that it was worth more than the mortgage, and if there was no price put out on it one day which would make it "worthless", does it make sense for the government to seize the house and sell it to your neighbour for 1/10 of what it's worth?

Or am I misunderstanding what is going on?

My favourite bailout solution... fund matching.

http://tinyurl.com/52ykyc

How about every time you invest in a stock the government invests an equal amount? Let the markets decide... just like someone was betting on your blackjack hand behind you.

For those interested, Coxe's top 10:

The Fund's top 10 holdings by market value, as at September 9, 2008 were: Security Description Market Value as % of NAV Canadian Cash 34.28% SPDR Gold Trust 4.46% Suncor Energy Inc. 3.42% Canadian Oil Sands Trust 3.31% Chevron Corporation 3.30% Barrick Gold Corp 3.30% CNH Global N.V. 3.03% Monsanto Company 3.03% Potash Corporation of Saskatchewan Inc. 2.67% Penn West Energy Trust 2.33% >>

Washington Mutual the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night, in what is by far the largest bank failure in American history.
Skylane

Federal regulators had been trying to broker a deal for Washington Mutual because a takeover by the F.D.I.C. would have dealt a crushing blow to the federal government’s deposit insurance fund. The fund, which stood at $45.2 billion at the end of June, has been severely depleted after suffering a debilitating loss from the sudden collapse of IndyMac Bank. Analysts say that a failure of Washington Mutual would cost the fund upward of $20 billion or $30 billion.

Did any of you ever think you'd witness anything like we're currently seeing in your lifetime?

Look how much the government has taken over recently.

And this bailout bill would give government even more ownership in the financial sphere.

And then if Obama gets elected he wants to add all of the health industry to that as well.

We could literally see government owning 40% of the country's businesses if things get really bad.

How is that better than a depression?

Rob.

shark- what interests me right now is drawing a bead on the high road, trying to settle in my own mind which option(s) truly benefits/benefit the American public...the billions that have been sucked out are gone-> does it really matter? seeking 'revenge,' as Twiggs implies, is apt to cloud one's judgment; we all know at least one life destroyed b/c someone was unable to let something go, right? in this case, the stakes are much larger...

i know this is a blog about trading and social equity..what we have this week is an historic event that certainly encompasses both, but while it won't stop me from trading or making judgments in personal conversations about the decisions that got us here, it does make me pause before second-guessing the motives and merits of those trying to help us avert a disaster...

Ok - So washington mutual gets taken down but where is the explanation or the details? If this is an example of why we need the bailout, there should be full transparency and explanation regarding this failure and how JP Morgan is able to purchase its assets. These backroom, afterhour deals with no explanation other than "Trust us" and "We need more money" are unacceptable.

Looks like Congress should have just coffed up another $700B with no strings attached to keep the party going? These are the guys that got us into this mess, we should have access to their portfolios for our evaluation.

WSJ's headline is nothing but gloom - "WM seized by FDIC, Bailout plan stalled..." Will the market open down 500 points, like the Jan. 18? Dow future is down 142 at this time. Will even a rate cut at this time save the 'credit market'? Wished I'd sold off more today.

Bert,

According to WSJ -
" WaMu Fails, Is Sold
Off to J.P. Morgan

Federal regulators seized Washington Mutual and struck a deal to sell the bulk of its operations to J.P. Morgan in what is by far the largest bank failure in U.S. history. Regulators said WaMu has suffered an exodus of $16.7 billion in deposits since Sept. 15, leaving the Seattle thrift "with insufficient liquidity to meet its obligations."

I am guessing that WM is seized by FDIC which proceed to dispose of its assets to raise cash, like all other banks they seized. JPM may be plain smart, refusing to deal with WM earlier, but buy directly from FDIC on the cheap.

Rob - Forget about health care, that issue was pushed to the back burner last year. It will be entertaining though if the candidates continue to discuss the subject.

McCain rushed back to DC and essentially did nothing. I think he and Obama are there to learn the details of how colossal this seizure (coronary) is, so they can "debate" the subject on stage.

Amazing timing! I'm at a book sale and what should fall into my hands but a small pocketbook "The Great Crash 1929" written in 1954 by one of the 20th century's great educators and economists, John Kenneth Galbraith. At less than 200 pages it is a quick read and there are too many comparables to what is happening today to get into here. I can only say that it seems evident that some history is being repeated. I will be acting accordingly to shore up my personal net worth in the coming days. It is really important that we look into the past for future direction and ignore the noise coming from the financial media and players such as Buffett who are acting as "organized support" for the market.

And yet Au still remains under $900.... I can't imagine why?

Healthcare should be pushed to the back burner. It's functioning a whole lot better than the financial system.

I may be still clinging to my young and risky ideals but I still say no bailout and withdraw all the FED money currently out there. "Drain the swamp" so to speak. We'll go through massive pain but we'll be stronger in the end.

The only way I would agree to a bailout is if the FDIC is in charge of it and we get to see everyone's complete balance sheet, including credit default swaps.

Rob.

Talk about fire sale prices: JPM bought $307B in
WM assets for $1.9B

http://tinyurl.com/5x3lwc

Sounds like it was a bank run combined with mortgage losses that led to Wamu closure.

http://tinyurl.com/3em83n

Should have stuck to just keeping hands in peoples pockets.

"When traders last ruled Wall Street, during the mid-'90s, few banks put much of their own balance sheets at risk; most acted mainly as brokers, arranging trades between clients. Now, virtually all banks are making huge bets with their own assets on many more fronts, and using vast sums of borrowed money to jack up the risk even more. They're shouldering risks for their clients to an unprecedented degree. They're dabbling in remote markets from Brasilia to Jakarta, and in arcane products like credit-default swaps and catastrophe bonds. Led by Goldman, many investment banks now do more trading than all but the biggest hedge funds, those lightly regulated investment pools that almost brought down the financial system in 1998 when one of them, Long-Term Capital Management, blew up."

http://tinyurl.com/4eomre

That article was from over 2 years ago, which was probably around the time I started reading this blog. Actually I think it was 2005.

"In any case that's the back-drop " the reason I continue to fear that one day soon we'll wake up from dream-land (George's Rose Garden) to an absolute calamity in the capital markets." - Bill Cara, Week #39 (2006-09)

That was 2 years ago too. Are we awake yet? It's free to go to Disneyland on your birthday. :)

http://tinyurl.com/3hv28c

You talk about bank failures enough, they're going to fail. Self-fulfilling prophecy.

http://tinyurl.com/453ufg

As Bill told us, right now those with cash are kings and queens. There is a lot of royalty in the US right now.

Micron (MU) a pick from back in the day is at $4.67 (up 7% today).

"Aren't you happy I put Research In Motion into the Cara 100 a few months ago? The stock is up over +40 pct since then."

My friend made over $30k just buying RIM.TO under $100 and selling over $100 last year.

Was considering a purchase tomorrow if it goes below $70 for long. My guess is the more things change, the more things stay the same.

Will be reviewing Oct 2006 Bill Cara Week in Reviews for some insight.

Talk about fire sale prices: JPM bought $307B in
WM assets for $1.9B

Mark to Model = $307B
Mark to Market = $1.9B

Mark to Market = big problems.

Hi,
Another good read is "The Crash of 79" - out of print but you can get it on amazon for .50.

I mentioned that I worked with wall street investors in new york several years ago. I witnessed alot of crime back then. They were funding companies Big Time without doing the due diligence. I sat in meetings with failed .coms where the CEO explained the business plan of the website and there wasn't one single buy button on the whole site. Yep. Some of these companies were burning up to 10 million dollars a month. And they weren't making a nickel. The CEO's had very lavish offices, most with a "private shower". We acquired one of the companies and the CFO left a box of personal items. She came back begging for the box and I knew it had something in it so I told her no. I checked the box and there were bank statements of her personal accounts. She had been transferring 10,000 a month to her private retirement account. yes it was all done through 3 electronic transactions. They knew the company was going down so they were draining the rest of the account so that after the bankruptcy, they could go start up again and get more venture capital from their friends on wall street. They are all connected, they all are the harvard grads and members of the ny society. I could write a book on what I witnessed. Also, all the lawyers and judges get their hands greased. that is the game

I believe there will be change as finally middle america is waking up.

in Gold I Trust

Earlier in the blog there was a link to rsi.caracommunity.com. That's a nifty little RSI tool. I've noticed a lot of the links are broken on the BillCara.com main page and no I am not complaining. Bills a busy man and I figure he can go after the big fish that need frying first. Are there any more tools available that the url's can be posted.

Thanks,

I try to keep track of some of the tools and links posted here.

http://bullrunner.blogspot.com

Right - mark to market. I'm still trying to understand what changed between the failure of WM and JPM's instant ability to make it work. The assets (or I assume loans) still exist and the depositor's still exist. What will JPM be able to do that WM couldn't do to make it work? What is stopping the run on the bank from continuing with JPM? Will JPM be in a weaker position to handle a run with less cash on its books?

Additionally, How many of those assets are bad assets, precipitous assets and good assets? Who is the market to which we are marking the bank assets? Is there a bank asset market? To whom is it available? Who gets the $1.9B from JPM? If it is shareholders, did they get a vote or a voice? Why not? This is what I mean by details or lack thereof.

Thanks wavesmash.

Robyn, I was going to try and relate what (I thought) I knew about the RSI system. Then, I clicked on the "show more information" link on the RSI page;
http://preview.tinyurl.com/4bubc5
And, lo there is a concise synsopsis.
Take any stock in AZ or in BUY and check out the chart at Stockcharts. That will show the turn around. I have the RSI page on my toolbar.
peace

wavesmash, what about the liabilities that Washington Mutual had? And the bond holders? I think it's more along the lines of:

$307B(assets marked to model)-$???(liabilities)=$1.9B

here is Ron Paul's opinion
http://tinyurl.com/3gdnyp
http://tinyurl.com/3wzxmu

tomorrow should be interesting. vacation couldnt come sooner on sat.

Or I think this is a more accurate formula:

($307B reported assets minus $???B in writedowns that should have been recognized and reported but weren't) minus ($283.6B in liabilities as of June '08) plus (the premium that the FDIC and the Fed insisted JP Morgan pay)= $1.9B

US Treasury - Blueprint for a Modernized Regulatory Structure

The PPT would like to take over FDIC & Office of Thrift Supervision. I was trying to figure out why FDIC would hand over the keys to WM's OPM to JPM when I came across this.

"First, the PWG should continue to serve as an ongoing inter-agency body to promote
coordination and communication for financial policy. But the PWG’s focus should be
broadened to include the entire financial sector, rather than solely financial markets.
Second, the PWG should facilitate better inter-agency coordination and communication
in four distinct areas: mitigating systemic risk to the financial system, enhancing financial
market integrity, promoting consumer and investor protection, and supporting capital
markets efficiency and competitiveness.
Third, the PWG’s membership should be expanded to include the heads of the Office of
the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation
(“FDIC”), and the Office of Thrift Supervision (“OTS”). Similarly, the PWG should
have the ability to engage in consultation efforts, as might be appropriate, with other
domestic or international regulatory and supervisory bodies.
Finally, it should be made clear that the PWG should have the ability to issue reports or
other documents to the President and others, as appropriate, through its role as the
coordinator for financial regulatory policy."

http://tinyurl.com/4h9sgv

The Paulson plan is clearly lined out in this document from March. It's 212 pages as opposed to the 3 pages presented to Congress.

1. Talks about some problems we posted about here.

"Second, in the face of increasing convergence of financial services providers and their
products, jurisdictional disputes arise between and among the functional regulators, often
hindering the introduction of new products, slowing innovation, and compelling
migration of financial services and products to more adaptive foreign markets. Examples
of recent inter-agency disputes include: the prolonged process surrounding the
development of U.S. Basel II capital rules, the characterization of a financial product as a
security or a futures contract, and the scope of banks’ insurance sales."

2. Talks about the $700 billion taxpayer line of credit.

"Given the increased importance of non-depository institutions to overall market stability,
Treasury is recommending the consideration of two issues. First, the current temporary
liquidity provisioning process during those rare circumstances when market stability is
threatened should be enhanced to ensure that: the process is calibrated and transparent;
appropriate conditions are attached to lending; and information flows to the Federal
Reserve through on-site examination or other means as determined by the Federal
Reserve are adequate. Key to this information flow is a focus on liquidity and funding
issues. Second, the PWG should consider broader regulatory issues associated with
providing discount window access to non-depository institutions."

3. Turns the Fed into an all-seeing eye?

"A number of key long-term issues should be considered in establishing this new
framework. First, in order to perform this critical role, the Federal Reserve must have
detailed information about the business operations of PFRA- and CBRA-regulated
financial institutions and their respective holding companies. Such information will be
important in evaluating issues that can have an impact on overall financial market
stability."

4. Talks about SEC changes
"and new congressional legislation to expand the
Investment Company Act to permit a new “global” investment company."

5. Talks about improving approval processes for ETFs and relaxing rules on creating them.

"Treasury recommends that the SEC undertake a general exemptive rulemaking under the Investment Company Act, consistent with investor protection, to permit the trading of those products already actively trading in the United States or foreign jurisdictions, such as ETFs: This means that sponsors can introduce new funds
that meet the same terms and conditions of previously exempted funds without
registering as an investment company."

Interesting paper... probably more than anyone would want to know about banking in the US.

It's always better not to see the man behind the curtain.

Some more commentary from Time blog back in March on the plan.
http://tinyurl.com/5ybzqc

"For market discipline to effectively constrain risk, financial institutions must be allowed to fail. " - Henry "Hank" Paulson

http://tinyurl.com/4s74r3

Re WM, note that it was taken down on a Thurs., not a Fri., which tells me things are accelerating. But still after the markets closed, so not (yet?) out of control.

Yesterday may have been the last good day for bulls to hedge, Friday may be the last good day for bears to hedge.

If the corporate credit markets really do seize up completely, any company with any significant debt is going to get a margin call - best case.

In this environment I like straddles of the type I have put on in the energy sector: long US trusts (no debt at all) / short XLE.

Of course nothing is a given, & notably the politicians will do very creative things to confiscate any assets they feel they need to "save the nation" if push comes to shove.

watch out . . .

One company profile report says Wamu had 49,403 employees with Revenue per Employee: $512,424.

Really sad day for US.

"Meanwhile it emerged Friday Nomura Holdings will pay just a token two dollars for the Europe and Middle East operations of bankrupt Wall Street giant Lehman Brothers."

http://tinyurl.com/45bkbm

Man, I had 2 dollars I would have dug up for LEH. Would have been fun to run it for a few days. Lots of expensive wastepaper baskets to buy. :)

Haven't these guys heard of eBay?

Letter to Congress signed by 200 Top US Economists opposed to the Bail out and 3 main reasons why it won't work

http://tinyurl.com/3hnh85

ALOHA !!

Okay ... well HANK GREENBERG has voted on the assets the US TAXPAYERS will inherit! WARREN BUFFET he is not!

He is selling "for liquidity"! Hummmmm??? Where's the US TAXPAYERS "liquidity" then?

As Bush would say,"GOOD JOB HANKIE AND BENNIE!!!"

READ ON:
Greenberg Sells 40 Million AIG Shares, Cutting Stake in Insurer

By Hugh Son
Enlarge Image/Details

Sept. 26 (Bloomberg) -- Maurice ``Hank'' Greenberg, the former chief executive officer of American International Group Inc., sold off 40 million shares of the insurer for about $125.9 million after the stock tumbled more than 90 percent this year.

Starr International Co., a firm run by Greenberg, sold 35 million AIG shares at $3.06 each, Starr said yesterday in a filing. Greenberg, 83, sold 5 million shares for about $3.77 apiece. He still controls more than 10 percent of the company.

Greenberg is selling shares ``for liquidity,'' according to another regulatory filing. Greenberg and companies he runs owned about 11 percent of AIG, the largest block, before the sales.

The New York-based insurer averted collapse last week by agreeing to a federal takeover. Greenberg was among investors who met Sept. 22 to discuss raising money to reduce federal involvement in a rescue. AIG said the next day it signed a deal for an $85 billion Federal Reserve credit line, reducing the options left for dissident shareholders. END

Bert and Q,

I believe that the shareholders, preferred share holders and bond holders were wiped out by the WaMu deal. The Calculated Risk blog has been following the saga and has details.

The guest on CNBC this AM (Christopher Whalen) is making too much sense. Finally someone speaking who gets the principle of free markets.

ALOHA !!

Hummmm $700bil here ... $700bil there ... pretty soon it adds up to be a lot of money!!!

We are now seeing where the US FOREIGN POLICY backed by NATO is going? As usual yet another US government failure. Now we have a Spanish speaking IRAN right in our own backyard! US FOREIGN POLICY SUCCESS SCORE = ZERO!

The new COLD WAR 2 is ramping up and so will military spending. Can we afford to be an EMPIRE any more? Would the World end tomorrow if we pulled all our bases out of 134 countries worldwide? Or do we need those bases to enforce US Dollar hegemony?

READ THE LAST SENTENCE ... Why do we keep re-electing failed policies? Are we that afraid of some REAL "CHANGE"?

The Russians and Chinese are following Bin-Laden's strategy and taking advantage of what Bin-Laden has offered them. The Russians know all too well what Bin-Laden's strategy is.

The problem with the current American political leaders is their arrogance gets in the way of their stupidity! The way they conduct business on Capital Hill reminds me of high school! This is the whole baby-boomer peer pressure in all its glory ...

IT ALL WORKS UNTIL IT DOESN'T !!!

Get ready for more instability in South America ... I am sure the CIA is hot on Chavez now! Hugo ... hire Steven Seagal and Chuck Norris ... maybe even Clint Eastwood would beef up your personal security team! How can I take out a life insurance policy on Hugo?

"HOLA SENOR ... Yo soy un associo de AIG ...quere seguros para su vida y tiene una plana que su familia se puede ganar media dinero para un demanda de seguro! Esta usted interesada? AHHHH ... BUENO-O-O!!"

Hummmmm??? Well ...

READ ON:
Putin says ties with Latin America a top priority

Sep 25 04:54 PM US/Eastern

By STEVE GUTTERMAN
Associated Press Writer

NOVO-OGARYOVO, Russia (AP) - Prime Minister Vladimir Putin vowed Thursday to make relations with Latin America a top foreign policy priority, a pledge backed by the first Russian naval deployment to the Caribbean since the Cold War.

Putin greeted Venezuelan President Hugo Chavez, on his second trip to Russia in just over two months, with offers to discuss further arms sales to Venezuela and possibly helping it to develop nuclear energy.

Chavez's visit takes place as a Russian naval squadron sails to Venezuela, across the Caribbean Sea from the United States, in a pointed response to what the Kremlin has cast as threatening U.S. encroachment near its own borders.

Both men suggested their countries are working to decrease U.S. global influence. END

"The Fed is very close to being illiquid"

The leveraged-mortgage-debt ponzi scheme is reaching the end of its rope,
possibly?

This could become a spectacular bust.
___________________________________________

" . . .
There has been a lot of talk that central banks would abandon US assets
because the perceived risk of holding dollars (and Treasuries) has gone up.

The custodial data though don't provide much evidence to support this
theory.

. . .
If anything, the pace of growth in the Fed's custodial holdings over the
past two weeks strikes me as stronger than the likely pace of global reserve
growth. That suggests to me that central banks are shifting funds out of the
commercial banks (and money market funds) into Treasuries that can be held
at the Fed's custodial accounts. I would bet that central banks are shifting
money to the BIS as well."

____________________________

(Comments)

September 26th, 2008 at 4:20 am
London Banker Says:

Excellent and timely, Brad. I've been speculating all week that the pressure
being used on the Congress to pass the Paulson Plan is the threat of Fed
illiquidity. As of two weeks ago, the Fed had lent out more than $600
billion of its $800 billion balance sheet Treasuries against crap MBS
collateral.
The Paulson Plan would have allowed the banks to unwind the repos putting
the Treasuries back in the Fed, get cash for the crap MBS, and get more
Treasuries from the issues financing the $700+ billion funding of the Plan.
As a bonus, the Paulson mark-to-maturity price becomes the implicit Level 3
price for capitalisation of all the firms and banks in the system, giving
them some breathing room to stay in business. Everyone wins except the poor
American taxpayer.
The Fed is very close to being illiquid. That is the fear factor we are
seeing at work, and the reason no one will discuss why the bailout is
needed - only emphasise the urgency.

http://blogs.cfr.org/setser

"No Short List" - Remember that Gov rescue plan? Well, it seems that our Gov (ie SEC) decided the best way to keep all Corps (donators?) happy was to pass the buck to the Exchanges. The SEC asked the Exchanges who should be on the List. The Exchanges then said to their Exchange listed Corps: "Which of you wants to be on that list?" - literally.

And our Treasury wants a blank check based on "Trust Me"??

Here's a snip from the AP article linked below:

" ... Thomas Weisel Partners analyst Steve Halper said even some of the companies on the list are not sure about the process for being listed.

"I have one company that's on the Nasdaq list, and I actually asked today, 'How'd you guys get on that list?' And their response was, 'We don't know,'" he said.
http://tinyurl.com/4nvukt

ALOHA !!

WAMU ... they can't even afford to wait until the weekends now!

ALOHA !!

In yesterday's trading(Sept 24)on the Japanese TOCOM Goldman Sachs covered 405 short gold contracts and bought 704 long gold contracts so that brings them down to a gold net short position of 627 contracts. Compare that to
May 2006 when Goldman had a gold net short position of 55,000 contracts ... WOW! These guys have been covering ever since ... As they have been covering the US and global financial systems have been collapsing. Now Goldman Sachs is very close to NET LONG in gold on the TOCOM. If you take the TOCOM gold futures then from the Goldman Sachs position you can say the gold price should rise and based on their NET SHORT holdings it would rise substantially, which to me indicates a $700bil+ bailout will cause the USDX to crumble. I believe that Goldman Sachs cannot afford to lose money from any trades on any markets now and that would include the TOCOM.

GOLDMAN SACHS gets it!!

MUST SEE! Jon Stewart's clip "Debt to America", but first a question: Why would anyone trust someone in a financial deal who firsts states emphatically

"...Non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency..."

Seriously, WHY?

Now, heeeeeeers Jon - truly a must see!
http://tinyurl.com/4cuyus

I agree that Christopher Whalen on CNBC this morning from 5 am to 6 am had some great points. His point about the impact of the Lehman collpase on banks was spot on. Basically he says inject cash to the banks instead of taking the toxic debt....makes sense b/c the debt is already so leveraged.

I'm starting to think that the only agenda our politicians have is their re-election. I will be happy to vote against every incumbent in a few weeks.

Did you folks catch Sen. Kanjorski's comments on CNBC ?

He said: "we're gonna get a package passed, we're gonna save the country, and we're gonna save the world."

If I hadn't heard it myself I wouldn't believe that it came from the mouth of a U.S. senator.

No wonder the rest of the world laughs at us.

Some say that many Americans get their news from Jon Stewart and from YouTube. The link to Jon Stewart on the Bailout is in my previous post. Here is a link to a YouTube video - actually, I'm impressed by what is being said by Bailout protesters - they seem much more informed than does Pres Bush.

http://tinyurl.com/4vyao3

Good morning.

Here are your Cara 100 Ratings Changes:

RIMM - Upgraded to Neutral @ Credit Suisse
RIMM - Downgraded to Sell @ Deutsche Securities
RIMM - Downgraded to Sector Perform @ RBC

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You must be as tall as this line, in order to ride the roller coaster.

LOL! What to do....what to do?

Do they vote for the package to "save" the system and vote against the 200 to 1 callers who oppose the rescue?

So far the only leader I've seen is Sen. Shelby from Alabama.

I see one of my banks was seized by FDIC last night. Lovely. I guess I had better make some electronic transfers.....

2nd: I saw your Twiggs post last night, did you notice the level of support he mentions if the package fails or is too small or difficult to implement? DOW 7500....yikes!

FRE - Stink bid @$0.60

Rick Santelli just told it like it is. We're in for serious pain either way so we might as well get the fix right so that the system works in the long run.

He's the voice of reason on CNBC.

"Did you folks catch Sen. Kanjorski's comments on CNBC ?"

FYI, Kanjorski is a Dem Rep from PA, not a Senator. He was in the news recently for other reasons:

The “Democrat Ethics Report” states:
“Congressman Kanjorski has steered over $9 million in federal funding to a company called Cornerstone Technologies, a company run by Mr. Kanjorski’s daughter and nephews.

TOG - Bonds - Here is a "free" StockChart on the 30yr Treasury price (wkly). Note gap down to but support by sma(50) BUT, below that chart is shown a matching TBT which is supposedly the inverse - no gap up.

http://stockcharts.com/h-sc/ui

Does this mean that the "No Shorts" attitude of the Gov has found a way to prevent TBT (and possibly) others from being a way to trade the TOG?

2nd, QT,

If QID breaks thru 100 today, I may have to "schnitzel" a little. ;^)

Sorry about that link. Try this one. It should work hopefully.

http://tinyurl.com/3tnq2m

RIMM $77. wonder how low it will go. But i like the action. RIMM is a good solid co and not going under. gonna wait a bit to see the movement.

Last night was the busiest night on this blog i can remember.

And what a difference a day makes eh?

I am feeling really hesitant going into stocks today at all. Am I losing my brass ones? Or am I just sensing massive downside risk?

I agree the FED is broke, I agree there are really massive bank failures, and if this kitty kat gets completely out of the bag the Dow will go to 6000, and it COULD be today. Why the heck do you think they ammended the short selling rules the other day? They didn't want shark_attack, whoever the heck he is, riding their flight 800 down into the ground and taking their money. We are in one heck of a Wall Street mess. Good job Hank (both of em). Heck of a job, Greenspan. The whole bunch ought to end up like Mussolini, hung upside down in the piazza.

sharkster:

Can you imagine how long the line will be to piss on them.

If Dow goes to 6000, nothing prevents you from profiting by shorting any of thousands stocks available or just going long QID etc... just making sure you are not going to sit on a sideline, sighing about short selling ban and missing all the profits :)

2nd,

I can agree with this much of your solution: "The best way to prevent a repeat is to take immediate action to restore confidence in the banking system."

But I can't accept any action to correct and restore by the same people who — allowed/caused/benefitted by— the problem. Paulson's expressions of surprise at the lack of oversight and restriction and his "concern for the taxpayers" has a Clintonesque "I feel your pain," ring to it.

The same goes for members of congress who presided over repeal of the regs brought about from 1929 experiences.

Like putting the Mob in charge of ethics reform.

if DJIA drops 300 or more in the first 30 minutes, I'll close my DXD and FXP positions.

Otherwise I'll look to scale sell.

bsi87...nice call on DXD.

My plan this morning is to be looking for bargains. Looking to add to TTM,GOL, SSO. May take first positions in DELL, BC, RIMM.

Vad, what do you make of all this and where do you think this thing is going? Is this a wall of worry (bullish)or the wall where they line you up and shoot you in the balls for target practice (Italy in Ethiopia in the 1930's)?

bsi87- nicely done...

shark- i'll be buying..

suggest waiting till 10 AM.

DIA indicates 177 pt drop

Spot,
"I'm impressed by what is being said by Bailout protesters - they seem much more informed than does Pres Bush."
Bush hasn't bought coffee, gas or health insurance lately. (ever?)
Neither have most members of congress or either of the two Prez candidates.

that only takes us back to wednesday's close...will add to positions closer to 10,600...

I liked sharks idea last night of a Cara convention....full time traders could even write it off as a business expense....if you're feeling lucky w/ the IRS.

TTM buy limit 7

ksobo2000

Thanks for the correction re: Kanjorski.

shark,

I can't forecast anything when it's all hinged on White House version of Deal or No Deal. The story changes every 10 minutes, going from "Deal is very close" to "No chance it goes through". For me this is wait-and-see situation where I have scenarios prepared for different version of resolution, and meanwhile just have to wait for resolution to come... scalping here and there of course, gotta keep fingers warm.

Grym - which makes the case for 2 terms max for congress. Our popular culture gives these people way too much attention than is healthy for one's ego.

bsi87 - Were you able to clear out of RIMM in after hours?

Thanks to all here for my trading "re-education".

I used to get greedy when stocks were "high" and nervous when they were "low." Thanks to trend and cycle tools provided by Bill, the simple RSI system, the Cara 100, etc., I'm now exactly opposite in mindset.

And a lot more profitable. ;-)